Value or usage-based pricing is when you charge based on usage, rather than having 3-4 flat rate pricing plans based on features. “Usage” can be defined by any number of things. For instance, Stripe’s pricing is based on a percentage of the charges they process.

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With a usage or value-based pricing model, customer expansion is baked right into your product. The more your customers use your product (or the more they grow), the more they pay. So even if you magically stopped gaining new customers, you could still grow your MRR from your existing customers.

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You see this pricing model used a lot by email marketing companies. They’ll generally price based on the number of email subscribers you have or the number of emails you send per month.

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A great example of this is EmailOctopus. Their pricing is based on the number of email subscribers you have. According to their Marketing Manager, Hollie Youlden, customer expansions accounted for 47% of new revenue and 9.48% of their MRR last month!

Since their pricing is usage based, the expansion happens almost automatically.