Why Outcome-Based Pricing?

Outcome-based pricing flips the script on how value is measured and delivered. Instead of customers paying for access, licenses, or hours of use, they’re paying for results. This approach has gained momentum as businesses demand greater ROI and alignment between their spending and the tangible outcomes they achieve.

For SaaS companies, this model makes perfect sense. It removes much of the friction around purchasing decisions, as customers see a direct correlation between what they pay and the results they achieve. However, implementing this model effectively requires tools that can track, measure, and ensure those outcomes.

According to A16Z in the December 2024 Enterprise Newsletter: "AI Is Driving A Shift Towards Outcome-Based Pricing": Software companies are currently thinking through three key shifts where AI is challenging them to think differently about pricing:

Software is becoming labor. AI is turning what used to be pure service businesses into scalable software plays. Traditional services that required human labor — like customer support, sales, marketing, or back-office finance administration — can now be automated and packaged as software products. This has blurred the line between software and service pricing models.

Per-seat is no longer the atomic unit of software. Consider customer support software Zendesk: companies currently pay per support agent ($115/month/seat), but when AI can handle ticket resolution, the natural pricing metric becomes successful outcomes. If AI can handle a sizable proportion of customer support, companies will need far fewer human support agents, and therefore fewer Zendesk software seats. This forces software companies to fundamentally rethink their pricing models to align with the outcome they deliver rather than the number of humans that access their software.

Variable costs are less predictable. Nearly every AI startup builds on foundation models (e.g., OpenAI, Anthropic, Mistral) which come with significant variable costs that scale with AI model usage. Every API call, every token processed, adds to their cost structure. This is a fundamental change in the underlying unit economics of pricing the AI service. The marginal cost of an additional user or usage is not zero and varies by user. And while inference costs are dropping dramatically, tasks requiring the newest models with advanced reasoning capabilities still incur relatively high costs. AI companies are leaning into usage-based pricing to account for this.

AI: The Enabler of Outcome-Based Pricing

AI plays a critical role in facilitating outcome-based pricing models. It provides the predictive analytics, automation, and real-time insights necessary to:

1. Identify the Outcomes That Matter: AI helps companies understand what success looks like for their customers by analyzing behavioral data, performance metrics, and other indicators. By leveraging AI-driven insights, businesses can tailor their offerings to align with their customers' unique needs and objectives.

2. Measure Performance: With AI-powered dashboards and analytics, businesses can track key metrics and provide transparent reporting to their customers. These tools ensure that both parties have a clear understanding of the value delivered, fostering trust and long-term partnerships.

3. Optimize Delivery: AI enables companies to refine their services, ensuring they’re consistently delivering value and improving outcomes over time. By identifying inefficiencies and providing actionable recommendations, AI helps businesses stay ahead of the curve.

4. Align Incentives: AI can automate the pricing mechanics, ensuring customers are charged only for the results achieved, creating a win-win scenario for both parties. This alignment of incentives fosters stronger customer loyalty and encourages a collaborative approach to problem-solving.

FlyCode: A Prime Example of AI-Driven Outcome-Based Pricing

At FlyCode, we’ve fully embraced outcome-based pricing with our Revenue Boost-Based Pricing model. Our mission is simple: to help subscription-based businesses recover lost revenue from failed payments and involuntary churn. But what makes FlyCode truly unique is how we align our success with our customers’ success.

Instead of charging a flat fee or a usage-based rate, FlyCode’s pricing is tied directly to the revenue we help recover. If we don’t boost your revenue, you don’t pay. This ensures that our incentives are perfectly aligned with those of our customers.

Here’s how AI enables our approach:

• Predicting Recovery Opportunities: FlyCode’s AI analyzes customer payment data to identify where revenue is slipping through the cracks. By leveraging machine learning, we uncover patterns and trends that human analysis might miss.

• Optimizing Payment Retries: Our AI algorithms ensure the timing, method, and messaging for retrying failed payments are optimized for maximum success. These algorithms dynamically adjust strategies based on customer behavior and payment history.

• Alternative Payment Methods: we dynamically process alternate payment methods, improving the likelihood of successful transactions.

• Transparent Reporting: Customers can see exactly how much revenue we’ve recovered for them in real-time, building trust and accountability. Our detailed reports provide insights into recovery rates, customer engagement, and areas for further optimization.

AI-Driven Insights: Beyond Recovery

Beyond recovery efforts, AI also plays a pivotal role in shaping the broader strategy behind outcome-based pricing. It enables companies to anticipate customer needs and proactively adapt their services. For instance:

1. Personalized Engagement: AI can analyze customer data to offer personalized recommendations, ensuring the services provided align precisely with what each customer values most.

2. Dynamic Benchmarking: By comparing performance across similar customer segments, AI allows businesses to set realistic yet ambitious targets that push boundaries while staying achievable.

3. Continuous Learning: AI’s iterative learning models mean that each interaction improves future results, driving smarter and more efficient processes over time.

Benefits of Outcome-Based Pricing for Customers and Businesses

1. Increased ROI: Customers are only paying for the value they receive, making it easier to justify their investment.

2. Stronger Relationships: Outcome-based pricing fosters trust and collaboration, as both parties are working toward a shared goal.

3. Innovation-Driven Growth: Businesses are incentivized to continuously innovate and optimize their offerings to deliver better outcomes.

4. Reduced Risk: For customers, the financial risk is minimized since they’re not paying upfront or for unused features.

5. Enhanced Accountability: Transparent reporting and measurable outcomes ensure accountability on both sides.

The Future of Pricing Is Outcomes

As AI continues to evolve, we’ll see even more innovative applications of this model, driving deeper customer satisfaction and stronger business relationships.

At FlyCode, we’re proud to be part of this movement. By aligning our success with our customers’ revenue growth, we’re not just transforming payments—we’re redefining what it means to deliver value in the SaaS world.

Are you ready to embrace outcome-based pricing? Let’s talk about how FlyCode can help your business recover lost revenue and drive real results.

Get your price with FlyCode