What we learnt about pricing while working with AI companies

Like most AI startups, even ChatGPT is contemplating Usage-based billing (UBB) with a credit system. While there’s enough hype about UBB and it may seem the norm these days, I believe ChatGPT should stick to fixed price (for now). Because as natural it may sound to simplify the billing, users would end up second-guessing how many credits each task will consume.

Here’s what we’ve learnt at Stykite, working with AI companies:

1. Avoid “Range Anxiety” - Stick to fixed pricing tier first. This reduces any friction to try out your product.

2. UBB Should Be Optional and Clear - If extra usage is allowed, it should be based on clear actions, not credits. Do not make your users convert actions into credits into balance remaining. It’s a terrible terrible experience.

3. The large shift towards UBB that you read on LinkedIn is only half the story. Most of these shifts have been in motion for months and some of these SaaS companies have slowly influenced finance orgs of their customers to work out the value vs cost. No one would do this exercise with you if you’re onboarding your customer for the first time. Get in easily, then consider UBB.

4. Hybrid pricing seems to be resonating well - Have a fixed price per plan, have an option to have more usage + UBB. BUT - Make sure the value to your customers are NOT credits, but actions. For example: Per Run, Per Outcome etc etc.

Finally - ensure that your billing system is flexible enough to support pricing transitions and experiments without disrupting the customer experience. It doesn’t have to be as seamless as Stykite, but having a tool that complements these experiments is key.