Broadly, there are three ways to price any subscription software product:
There is an obvious comparable example in the airline industry, where low cost airlines adopt a consumption based model and unbundle their services such that you can either choose to leave out or pay extra for bags, allocated seating and inflight meals. The more premium airlines have historically included all of this and just charged a flat fee for the ticket which includes the extras.
In the analytics industry where Timeflow is operating, the vast majority of companies use heavily consumption based pricing. You’ll pay per user, per gigabyte ingested, per alert, per agent, or sometimes some arbitary “credit” system.
Consumption based pricing is generally better for the customer. The price you pay is tied to the value you get, and you aren’t paying for capacity or features that you don’t need. It also creates a low cost of entry whilst you start, and the cost only grows as your usage increases and the value becomes proven.
The problem is that the consumption based pricing models can be a bit of a trap due to banana skins such as the following:
This isn’t to say the tools aren’t great and don’t deliver increasing value, but the financial risk and exposure to the customer is real. They will start with something which they think will be small and tactical, but can end up with quite a major expenditure which they are locked into, and need to battle against to keep costs down or potentially migrate away from.
For this reason, here at Timeflow we are generally against consumption based pricing as we do not see it as customer friendly in this particular space. A data platform will of course be bringing in more and more data over time, from more and more sources, so consumption based pricing just doesn’t feel right.
The downside for us is that this does make apples to apples comparisons tricky in pricing conversations. Timeflow have a more transparent but more inclusive pricing model, whereas our competition have a small “per unit” cost which looks more attractive at the outset. However, as soon as you move into production, you will usually find that other products grow in totally uncapped costs, whilst we are relatively fixed (fair usage charges aside.)
We have shared our experiences as we expect to be referring back to it multiple times in the coming months. We would welcome any thoughts or input into this as we try to evolve the ideal pricing model.