Definition

Consumption Pricing

A pricing model in which customers pay based on actual usage rather than seats or licenses. Forces the vendor to care about adoption velocity and ongoing engagement — because revenue scales with real usage, not contract value. When Knapsack moved to consumption pricing, time-to-value became the primary commercial driver: the faster a customer gets value, the faster they consume more, the faster revenue grows. Aligns vendor and customer incentives in a way seat-based pricing does not.

From the episode “Stop Designing Screens, Start Designing Patterns”

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