Per-Seat vs Usage-Based Pricing: How to Choose for SaaS

"Seat-based pricing is dying" is one of the loudest takes in SaaS right now. Reddit threads from this past week have founders asking if per-seat pricing is a "suicide mission" for AI-integrated products. Medium posts declare the "death of seat-based pricing" as settled fact.

The reality is more interesting than the headlines.

What Is Per-Seat Pricing?

Per-seat pricing (also called per-user pricing) charges customers based on the number of people accessing the software. One user, one license, one line item on the invoice.

How it works:

• Starter: $10/user/month

• Professional: $25/user/month

• Enterprise: custom per-user pricing

The model's strength is its simplicity. Buyers understand it instantly. Finance teams can forecast it. Sales reps can quote it on the spot.

Companies using per-seat pricing: Slack, Salesforce CRM, Asana, Jira, Figma (for its core product), Microsoft 365, Notion, Linear

Per-seat pricing dominated SaaS for a reason: throughout the 2010s, software value genuinely scaled with team size. More people in Slack meant more conversations, more channels, more value. More seats in Salesforce meant more pipeline coverage.

That equation held until AI showed up.

What Is Usage-Based Pricing?

Usage-based pricing charges customers based on how much they consume. Instead of counting humans, you count outputs: API calls, workflow runs, credits spent, data processed, or AI actions performed.

How it works:

• Pay per API call ($0.01 per request)

• Pay per credit consumed (1 AI report = 10 credits)

• Pay per workflow execution (1 automation run = 1 count)

Companies using usage-based pricing: Snowflake, Twilio, OpenAI, AWS, Stripe (per transaction), Vercel

Usage-based pricing took off first in infrastructure (AWS, Twilio) where costs genuinely track with consumption. The model is now spreading to application-layer SaaS as AI features introduce variable costs that per-seat pricing cannot absorb.

Per-Seat vs Usage-Based: Direct Comparison

Neither model is universally better. The right choice depends on three things: your cost structure, your buyer, and how your product delivers value.

Why AI Changes the Equation

For 15 years, per-seat pricing and SaaS value scaled together. AI broke that alignment.

Here is the core problem: when one user with an AI agent does the work that previously required five people, per-seat pricing creates a lose-lose dynamic.

☒ The buyer pays less but gets more. They reduce headcount, cancel seats, and your revenue drops even as they extract more value from your product.

☒ The seller gets punished for delivering value. The better your AI features work, the fewer seats customers need. You have built a product that erodes its own revenue model.

This is not a theoretical concern. Bain & Company analyzed 30+ SaaS vendors introducing generative AI capabilities and found that only 35% simply increased per-seat prices. The other 65% are layering usage-based AI metrics on top of existing seat pricing. None have fully abandoned seats, but the majority are building hybrid billing models.

SaaStr reports that companies are already downgrading seat counts as AI agents enter production. When 12 AI agents replace tasks that required human seats, the seat-based revenue model starts shrinking.

The question is not whether per-seat pricing is dead. It is whether per-seat pricing alone is enough.

When Per-Seat Pricing Still Works

Per-seat pricing is far from obsolete. It remains the right model in several clear situations.

✦ Value Scales with Team Size

If adding users directly increases the product's value, seats make sense. Collaboration tools like Slack, Notion, and Figma fall here. More people in the workspace means more conversations, more documents, more designs. The network effects justify the per-user charge.

✦ Costs Are Predictable Per User

When your infrastructure costs scale roughly linearly with user count (not usage patterns), per-seat pricing keeps things simple. CRMs, project management tools, and HR software typically cost you about the same per user regardless of how much each person clicks around.

✦ Your Buyers Are Enterprise

CFOs and procurement teams build annual budgets. They want a number they can plan around. "300 seats at $25/seat = $90,000/year" is simple. "Estimated 450,000 credits at variable rates depending on feature mix" is a procurement nightmare.

✦ Simplicity Is a Competitive Advantage

If your competitors have confusing, hard-to-predict pricing (credits, operations, tokens), being the simple per-seat option can win deals on clarity alone. Sometimes the best pricing strategy is the one buyers can explain to their boss in one sentence.

If your market expects per-seat pricing and your product genuinely delivers more value with more users, follow the market's pull. Don't overcomplicate pricing because a Medium post told you seats are dead.

When Usage-Based Pricing Works Better

Usage-based pricing shines in specific conditions. If several of these apply to your product, it may be the right primary model.

✦ Your Product Includes AI That Does Independent Work

AI agents, automated workflows, and background processing all generate value without a human actively using the product. Per-seat pricing has no way to capture this value. Credits, workflow executions, or AI actions can.

We covered this in detail in our guide on usage-based pricing for SaaS. The PricingSaaS 500 Index found that 79 SaaS companies now use credit-based pricing, up 126% year-over-year. The shift is real and accelerating.

✦ Your Costs Vary Significantly Per Action

If an AI image generation costs you $0.04 while a text query costs $0.002, flat per-seat pricing forces you to either underprice heavy users or overprice light users. Usage-based pricing aligns your revenue with your costs, protecting margins at every scale.

✦ Usage Is Sporadic or Seasonal

Some products see intense usage during planning cycles or campaign launches, then go quiet. Competitive intelligence tools, analysis platforms, and consulting-adjacent products often have this pattern. Usage-based pricing accommodates natural cycles without forcing customers to pay monthly for something they use quarterly.

✦ There Is 100x Variance Between Users

When your smallest customer does 10 actions per month and your largest does 10,000, you need either 15 pricing tiers or a usage-based model. Credits and metered billing handle this variance naturally without creating a pricing page that looks like a spreadsheet.

The Hybrid Model: What Most SaaS Companies Should Consider

Pure seats and pure usage are both extremes. The middle ground, hybrid pricing, is where most modern SaaS companies are landing.

According to Maxio's 2025 SaaS Pricing Trends Report, companies using hybrid models report the highest median growth rate at 21%, outperforming both pure subscription and pure usage-based models. BetterCloud's SaaS industry research found that 46% of SaaS companies already blend subscriptions with variable charges.

✦ How Hybrid Pricing Works

The structure is straightforward: a base subscription (per-seat or flat) provides predictable revenue and budget certainty for buyers, while a usage component captures value from power users and variable-cost features.

✦ Three Hybrid Structures

1. Seat Base + Credit Packs

Include a credit allocation with each subscription tier. Heavy users buy more credits.

• Starter ($29/mo, 1 seat): 100 credits included
• Pro ($79/mo, 5 seats): 500 credits included
• Additional credits: $10 per 100

2. Seat Base + Overage Billing

Set monthly usage limits per tier. Charge per-unit overage when customers exceed them.

• Pro: 1,000 API calls included, $0.01 per additional call

3. Seat Base + Feature-Specific Metering

Keep most features unlimited, but meter expensive or variable-cost features separately.

• Unlimited core editing, but AI-powered features consume credits

We compared credit-based and monthly limit approaches in our guide on credits vs monthly pricing. The hybrid approach takes the best of both.

Decision Framework: 7 Questions to Pick Your Model

Not every product needs to rebuild its pricing. Use these questions to determine what fits your situation.

Real Examples: Per-Seat vs Usage Across SaaS Categories

Different SaaS categories have settled on different models for good reasons.

The pattern is clear: products where humans collaborate trend toward seats. Products where software works independently trend toward usage. Products with both trend toward hybrid.

Common Mistakes Founders Make

☒ Copying Competitors Without Understanding Why

If your competitor uses per-seat pricing, it might be because their product is fundamentally different from yours. Slack's per-seat model works because Slack's value is proportional to the number of people communicating. That does not mean every collaboration-adjacent tool should charge per seat.

Use competitive pricing analysis tools to understand the why behind competitor pricing, not just the what.

☒ Switching Models Abruptly

Migrating from per-seat to usage-based pricing overnight alienates existing customers. The companies that transition successfully do it gradually: introduce a usage component alongside seats, let customers adapt, then shift the primary model over 2-3 quarters.

☒ Making Usage-Based Pricing Unpredictable

If customers need a calculator and a finance degree to estimate their monthly bill, you have failed. The biggest complaint about usage-based pricing is cost unpredictability. Counter this with clear estimators, spending caps, committed-use discounts, and proactive notifications before bills spike.

☒ Ignoring the Enterprise Budget Cycle

Even if usage-based pricing is theoretically better for your product, enterprise buyers need budget certainty. Offer committed-use packages, annual credits with rollover, or capped usage tiers. Give procurement something they can put in a budget without caveats.

☒ Overcomplicating the Hybrid Model

Hybrid does not mean combining every billing dimension you can think of. Seats + credits + overages + feature add-ons + platform fee = confusion. Pick one primary metric (seats or usage) and one secondary metric. Two dimensions is enough.

How to Validate Your Pricing Model Choice

Before committing, validate your model against real market data.

1. Analyze your top 5 competitors. What model do they use? What is their pricing page structure? A pricing intelligence approach gives you data instead of guesswork.

2. Interview 10 customers or prospects. Ask how they budget for tools like yours. Do they think in terms of team size or output volume?

3. Run the numbers on both models. Model your revenue under per-seat pricing and usage-based pricing using actual customer data. Which model captures more value from your power users without overcharging your smallest customers?

4. Check your unit economics. Calculate your cost per user vs your cost per action. If cost per action varies more than 5x across customers, usage-based pricing will protect your margins better.

5. Test with a subset. Offer new customers a choice between per-seat and usage-based pricing. Track which they choose, which generates higher LTV, and which produces lower churn.

Per-Seat vs Usage-Based Pricing FAQ

Making Your Decision

The "per-seat vs usage-based" debate misses the real question. The right answer is almost never pure seats or pure usage. It is about understanding where your product's value lives and pricing accordingly.

If your value scales with team size, start with seats. If your value scales with output, start with usage. If both are true (and for most modern SaaS products, both are), build a hybrid that gives buyers predictability while capturing the full value of what your product does.

The companies getting this right in 2026 share one trait: they treat pricing as a product decision, not an afterthought. They test, measure, and iterate on their billing model with the same rigor they apply to building the product itself.