What are credit-based pricing models and how do they work?

Usage-based and hybrid pricing models are increasingly popular among SaaS, AI, and infrastructure companies, providing a flexible approach to monetization that aligns with real costs such as API calls and compute time. Credits-based subscription models, where customers prepay for a set number of credits redeemable for various services, offer predictability for businesses and flexibility for customers. These models help improve cash flow, revenue recognition, and customer retention by allowing usage spikes without renegotiation and simplifying complex pricing structures. Lago's platform exemplifies a developer-friendly solution that supports real-time metering and hybrid pricing, catering to the industry's shift towards usage-based strategies. As nearly 40% of SaaS companies now adopt usage-based pricing, credits-based models are seen as an effective strategy for aligning revenue with the value delivered and meeting evolving market demands.

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