Outcome-Based Pricing
Most AI companies charge for work, not outcomes. Success-based pricing flips this approach, aligning costs with measurable customer value.
What is Outcome-Based Pricing?
Outcome-based pricing aligns payment with results. Unlike usage-based pricing, which charges for work done regardless of outcome, with outcome-based pricing, customers only pay when they see real value, like a support ticket answered by the AI chatbot or a qualified lead books a demo with an AI SDR. When done well, outcome-based pricing builds trust and ties revenue directly to customer success. Adopting outcome-based is ambiguous for most businesses, especially in developer infrastructure. For instance, when using AWS EC2, the work and the outcome are the same: the instance requested by the customer is running and healthy. The customer's expectations are met simply by supplying a healthy processor; thus, payment is by the minute, regardless of the processing outcome. But this is not always the case.
Where is this pricing model used?
Outcome-based pricing has created a lot of buzz recently because it's not always clear, from the customer's perspective, what value they will receive from new AI services. It's most commonly used in AI-powered customer success and GTM products:
- AI chatbots
- AI SDRs
Defining Success Can Be Challenging
Defining success can be challenging. For example, when using an AI chatbot, what is the success event? Is it when the customer's issue is resolved? Is it when the customer's issue is resolved and they don't return within 24 hours?
For instance, with an AI SDR, you don't want to charge customers for a “No, thank you” reply. The vendor must implement robust logic, possibly using an LLM to analyze the message and determine if the outcome qualifies as positive. LLMs excel at understanding context but are not always deterministic, so the result will likely be debatable
Revenue Collection and Recognition Complexities
Charging for work delivered now but only potentially billed in the future introduces revenue collection and recognition complexity. What if the customer cancels or changes their plan before the outcome happens? Should billing apply based on the old pricing when the work happens or the new one when the outcome success loop is closed? How long in the future is an outcome still billable? These are non-trivial questions that require decisions from finance.
What does this pricing model solve?
- Aligns price with delivered value
- Supports organic account growth
- Works well with PLG and self-service models
Why is this pricing model challenging?
- Defining and measuring success can be complex and subjective
- Success event happens in the future
- Revenue collection and recognition complexities