How to adapt your GTM strategy to usage-based pricing

Pricing is one of the most sensitive topics discussed with your customers, and it can be especially tricky for software-as-a-service (SaaS) companies. Get it right, and you can maximize your customer lifetime value. Get it wrong, you'll lose margins and deals. In the past 20 years, pricing models in tech have evolved from perpetual licensing to seat-based subscription models and now to usage-based pricing. In fact, according to OpenView, more than two-thirds of tech companies will adopt a usage-based pricing or hybrid model in 2024. Deploying an effective consumption pricing model is about more than a change to your CPQ and billings solutions and an enablement session with the field. Success depends on the decisions your revenue leaders make to connect your entire go-to-market (GTM) strategy.

In this blog post, we'll discuss five areas of your GTM planning that need to be aligned to successfully transition to a usage-based pricing model. We'll cover everything from forecasting consumption and designing new, more effective coverage models to setting motivating quotas and aligning your sales incentives to your new strategy. With these tips, you can have confidence that your pricing and GTM strategy are setting you up for success.

Forecasting consumption and revenue

Making the shift toward a usage-based pricing model begins with how you forecast sales and revenue. You need to understand the bookings impact of each customer moving from monthly, annual, or multi-year contracts to a hybrid or pure consumption approach on your bottom-line. Collaborative scenario planning and "what-if" analysis of price changes against both historical and forecasted transactions can quantify the risks and rewards of price changes across the business, down to particular geographies, products, or customer segments and your GTM teams that serve them. Forecasting consumption requires different data — a trackable metric that measures consumption rather than annual recurring revenue (ARR). Your forecasting process must also evolve. With usage models, you'll need to forecast when a customer will consume and pay for a particular product or service, not when a deal will close or renew.

Getting your forecast correct helps get your pricing right when first deploying a usage-based pricing model. After deployment, a real-time accurate consumption forecast drives your revenue forecast, long-range planning that looks 3–5 years out, and annual revenue planning where you set targets and quotas, allocate headcount across your GTM teams, and operational budgets to execute your GTM strategy. Without an accurate forecast, you'll struggle to set the right price, fair quotas, optimize your sales coverage models, distribute motivating incentive compensation plans, and effectively allocate marketing resources that ultimately drive greater customer adoption and usage.

Target-setting and quota planning

In a usage-based pricing world, quota planning becomes increasingly intricate and complex. With no standard usage threshold to use as a benchmark, companies must delve deeper, understanding how customers use their product, identify meaningful usage metrics, and establish achievable usage goals. These goals will roll up through a bottom-up quota-planning process, based on your forecasted consumption from each prospect and customer. The more accurate your forecast, the more accurate your targets, with less negotiation during the quota-setting process and fewer post-deployment adjustments.

Many cloud businesses are adopting a hybrid pricing approach, using a mix of consumption and subscription licenses to sell their products and services. As a result, you may need to establish multi-factor quotas that align multiple GTM teams to business objectives. A hybrid top-down and bottom-up quota planning process enables you to reconcile sales targets tied to usage, licensing, and services. Arriving at motivating, explainable quotas distributed fairly among your GTM teams that feed your real-time forecasting and incentive compensation plans will increase their productivity and reduce costly voluntary attrition.

Account segmentation and coverage models

Your sales coverage model is another critical element of your GTM strategy that needs to align with your usage-based pricing model. Traditional sales coverage models built from segmented accounts assigned to territories were designed for seat-based pricing, where the customer value and journey was relatively predictable. Marketing would run campaigns, BDRs schedule meetings, hunters land new deals, farmers cultivate upsell and cross-sell opportunities, professional services implement the customer, and account management or customer success teams get the renewal in. However, in a usage-based pricing model, the value of an account isn't always predictable and can vary significantly from customer to customer. To address this, companies should consider moving to an outcome-based customer coverage model.

Implementing a robust customer segmentation strategy is key in aligning all your GTM teams and programs around the specific needs and usage patterns of different customer cohorts. By segmenting customers based on their usage levels, industry verticals, or pain points, companies can design more effective coverage models. Your teams will be able to craft more personalized marketing messages, execute more engaging sales cycles, and upsell strategies. This tailored approach enhances customer engagement and satisfaction, ultimately leading to increased revenue opportunities and long-term customer retention. Getting the right coverage model with balanced territories with your new account segmentation criteria will help you accelerate new logo acquisition and maximize customer lifetime value.

Marketing performance management

Marketing plays a significant role beyond the pricing committee to plan and execute an effective usage-based pricing strategy. When operating in sales-led-growth (SLG) organization with larger marketing budgets and teams, activities such as ABM campaigns drive higher customer consumption. Conversely, product-led-growth (PLG) marketing strategies with smaller teams and budgets increase consumption through free trial and freemium programs with lower customer acquisition costs. Effective marketing campaigns, customer advocacy, and communities increase adoption, usage, and your customer lifetime value.

Both B2B and B2C marketing operations and marketing finance teams are critical to increasing the effectiveness and impact of your marketing strategy on customer usage. Using the same account segmentation across your GTM teams ensures the right marketing activities target the right customers at the right time, elevating the customer experience and consumption. Bringing both the performance and cost of your marketing programs into one place enables you to track the effectiveness and ROI of your programs and channels, forecast future outcomes, and pivot without under or overspending.

Incentives and rewards

Shifting to a usage-based or hybrid pricing model reduces the upfront incentive payout reps typically see from closing annual or multi-year contacts. Sales compensation design and optimization is a key to aligning the behaviors of your GTM teams to your evolving pricing strategy. Start by understanding how every team — from BDRs, account executives, and solutions consultants to customer success, professional services, and product management — impacts the revenue lifecycle of a customer over time. Teams who stay focused on new logo acquisition may face fewer changes than others who need to prioritize customer adoption and consumption.

Incentive compensation plans aren't often rebuilt from scratch, just as pricing strategies aren't often rebuilt from scratch. The same forecasting, scenario planning, modeling, "what-if" analysis you used to understand the impact of usage-based pricing on your GTM strategy will help you understand both the behavioral and financial impact of your re-designed plans and changes to your existing plans over time. With greater insights and explainability, you'll improve adoption of your new pricing strategy and comp plans across teams while reducing costly voluntary attrition.

Integrating your usage-based pricing and GTM planning

The technology landscape is undergoing a seismic shift. Today's technology companies are challenged not only by the pressure of investors to build and adapt plans that balance growth and profitability. More than two-thirds of cloud businesses have adopted a consumption-based pricing model in 2024. To successfully roll it out, revenue leaders must make sure their GTM strategy is completely aligned. Ending siloed planning across your sales, marketing, customer success, and professional services teams will ensure the GTM strategies you put forward are aligned with your organization's new pricing strategy and broader goals for sustainable and profitable growth.