4 Big Challenges of Usage-Based Pricing: And How to Overcome Them

Usage-based pricing, also known as pay-per-use or transactional pricing, has become the default model for many technology services.

It promised a simple value proposition: pay only for what you use. The model sounds seductive at first — start small, no heavy upfront costs, and an opportunity to scale your operations.

This remains true for low-usage companies and lean teams. However, as companies scale, many are finding that usage-based pricing creates more problems than it solves.

What begins as a flexible way to align cost with consumption can quickly become a budgeting nightmare, an innovation blocker, and a source of friction across teams.

In our previous post, we compared transactional vs. non-transactional pricing. Here, we go more in-depth into the four key challenges of usage-based pricing and consumers and offer strategies to help you overcome them.

Budget Unpredictability and Cost Overruns

“Why is our bill so high this month?!”

That question is becoming all too common among product, engineering and finance teams.

We’ve all been there — working on a project, using the technology at our disposal, scaling our operations and driving success — all while racking up a huge tech bill in the background.

This is the curse of usage-based pricing. Your monthly spend can swing wildly depending on your technology usage, whether that’s due to your customer demand spikes, internal testing, experimentation, integration issues, and more.

This variability undermines financial planning and creates stress for teams trying to manage spend across dynamic workloads. In some cases, companies have had to abandon cloud workloads altogether and attempt to regain cost control.

Cloud services are one of the worst culprits: according to Flexera’s 2024 State of the Cloud Report, 82% of enterprises say managing cloud spend is their top cloud challenge. And nearly two-thirds regularly exceed their budgets.

How to Overcome Budget Unpredictability

• Embrace FinOps to increase cost visibility across teams, including real-time monitoring, usage tagging, and forecasting models help detect anomalies early.
• Negotiate usage caps or flat-rate pricing tiers with vendors, especially for predictable workloads.
• Choose unlimited usage, fixed-fee technology providers where predictability and spend certainty is guaranteed.

The “Taxi Meter” Effect: Innovation Takes a Hit

Transactional pricing changes behaviour.

When every API call or compute cycle carries a price tag, teams become conservative with their usage.

The now-famous motto of “move fast and break things” is replaced by “move carefully and hope we don’t get billed for it.”

This chilling effect can stifle experimentation. Engineers avoid running costly A/B tests, product teams hold off on new features that rely on expensive services, and internal innovation stalls—not for lack of ideas, but for fear of triggering the next big bill.

It can be demoralising for your teams, and long-term growth takes a hit.

How to Overcome Innovation Stalls

• Shield R&D environments from metered billing by using sandboxed or prepaid dev environments.
• Allocate an innovation budget that teams can draw on for testing new ideas.
• Work with vendors offering trial periods, development allowances, or usage forgiveness.
• Adopt flat-rate pricing models for essential infrastructure or services, removing the usage anxiety and restoring freedom to experiment.

Vendor Lock-In and Loss of Leverage

Perhaps one of the most important yet the least discussed downsides of usage-based pricing is how it reinforces vendor lock-in.

The more your usage grows, the harder it becomes to switch providers. You’ve built around a specific tool, migrated data, trained staff—and now usage fees are climbing faster than you can control.

Vendors know this. And in many cases, pricing power is used to enforce commitment, even when value you see plateaus.

Take Coinbase, for example. In 2022, reports surfaced that the crypto exchange was paying $65 million annually to Datadog for observability tooling. Engineers referred to it as “where the money leaks.” The company ultimately began building its own stack to claw back costs. Only then did the vendor offer steep discounts.

This cat-and-mouse game eroded trust.

How to Overcome Vendor Lock-In

• Architect with mobility in mind, using open standards and avoid relying too heavily on your vendors.
• Negotiate escape clauses, including price caps, flexibility if usage drops, or tier downgrades.
• Push for pricing alignment. Choose vendors whose revenue is not tied to when you use the product or service more. Unlimited pricing can foster that alignment by decoupling vendor incentives from raw usage.

Procurement and Billing Complexity

Behind every usage-based bill is a small army of professionals trying to make sense of it.

Engineering teams spend hours building dashboards to monitor consumption, finance teams need spreadsheets to decode invoices and catch anomalies, product managers are asked to justify usage spikes. It’s a distraction from delivering value.

And it doesn’t end after procurement. The complexity of usage tiers, variable rates, and opaque thresholds can drag out vendor selection and contract renewals. A process that should take days can stretch to months.

How to Overcome Complexity

• Track the total cost of consumption, including the time teams spend managing it. But be aware that overhead adds up quickly.
• Invest in tooling to reduce the manual burden of tracking usage.
• Consider fixed-rate pricing for high-importance services. It simplifies budgeting, removes back-and-forth with procurement, and often shortens buying cycles.

Usage-Based Pricing Isn’t Evil — But It’s Often Inefficient

To be clear, transactional pricing has its place. In our last piece we evaluated the pros and cons of both transactional pricing and non-transactional pricing and found that it works for low-frequency services, temporary workloads, or MVP-stage experimentation.

But for growing teams building at scale, the flaws quickly outweigh the benefits. Unpredictable costs, risk-aversion, operational drag, and lock-in can significantly limit your pace of execution.

Our Advice: Make Pricing Work for You

If you're stuck in the transactional trap, here are three strategic moves:

1. You can audit where usage-based pricing is hurting the business most. Start with high-volume services and assess the true cost—not just the bill, but the impact on innovation and internal time.
2. Try to push your vendors on pricing flexibility. Unlimited usage, flat-rate models, or usage bands can give you predictability without compromising performance.
3. Switch to vendors who align with your goals. Choose partners who price for value, not just consumption. At TravelTime, for example, we offer a location API with truly unlimited usage at a price that works for your scale. No metering, no surprises. Check out our Distance Matrix pricing comparisons here.

Struggling with usage-based headaches?

Explore how TravelTime’s fixed-cost, unlimited usage location API removes barriers to scale, reduces internal complexity, and fosters innovation.

Talk to our team and start building without limits.