Fynn GloverCo-Founder & CEO, Schematic · Co-founder & CEO of Schematic | Runtime monetization infrastructure for SaaS & AI companies

Ken Babcock, founder/ceo of Tango on the ROI of usage-based pricing

29 Dec 2024 · 1 min

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In this excerpt, Ken Babcock emphasizes that successful usage‑based pricing hinges on the finance team’s ability to clearly demonstrate and predict the return on investment (ROI). He argues that the value metric tied to usage must be explicit—e.g., paying per a specific unit—so that ROI can be communicated straightforwardly and incorporated into financial planning. The core message is that a clear, usage‑linked value metric enables finance to prove ROI, make it predictable, and embed it into the company’s budgeting and forecasting processes.

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You just have to, you have to be super self-aware about your business. If we take a step back and think about pricing as how can the finance team, you're probably not interacting with much in the sale, how can your finance team easily prove the ROI? And so, and how can they make it predictable? How can they build it into their plans? Where usage can be really powerful. Is if the value metric tied to usage base, so I pay per, you know, XYZ, if that value metric, that XYZ is really clear and, and can clearly communicate ROI in some way, I just think your value metric for usage base needs to be really clear.