Usage-Based Pricing: 9 Subscription Models for Any Industry

John Warrillow started and exited four companies, wrote the bestselling Built to Sell, and discovered that the most important lever for usage-based pricing is one most founders underestimate: recurring revenue structure. In The Automatic Customer, he identifies nine subscription models that apply far beyond software.

John breaks down each SaaS monetization model with real case studies - from Dollar Shave Club's consumables play to Salesforce's front-of-the-line support tiers to Zipcar's network effect strategy. You will learn the 3:1 LTV to CAC ratio investors demand and why usage-based pricing through subscriptions makes your company more valuable.

Warrillow has built and sold four companies and says he wishes he had written The Automatic Customer before Built to Sell - because building recurring revenue through the right subscription models should come before thinking about exits.

🔑 Key Lessons

• 💰 Usage-based pricing requires at least 3:1 LTV to CAC: John Warrillow says professional investors won't touch a subscription business unless lifetime value is at least three times the customer acquisition cost. This ratio determines whether recurring revenue is truly sustainable.
• 🎯 Front-of-the-line pricing creates premium usage-based pricing tiers: Salesforce and Adobe charge subscribers for expedited support response times. Offering 1-hour critical support versus 2-day standard tickets lets you capture willingness to pay from enterprise customers.
• 🔄 Network effects drive SaaS monetization through density not breadth: Zipcar nearly failed trying to cover all of Boston. They survived by breaking the city into 16 micro-precincts and achieving subscriber density in each one before expanding to the next.
• 🛠️ Brand beats Amazon for consumables subscription models: Dollar Shave Club competed with Amazon by injecting entertainment and personality into a boring commodity. When your product is undifferentiated, brand and community become the subscription differentiator.

Chapters

• Introduction
• Meet John Warrillow - author, founder, 4x exiter
• John's personal life - dad, cyclist, Ironman
• Success quote - Roosevelt's "In the Arena"
• How Built to Sell changed the way Omer thinks about business
• The premise of The Automatic Customer
• Subscription models aren't just for software companies
• Why John wrote this book after Built to Sell
• How John researched the nine subscription models
• The LTV to CAC ratio investors demand for usage-based pricing
• Model 1 - Membership website
• Model 2 - All-you-can-eat library (Netflix, Spotify)
• Model 3 - Private club model
• Model 4 - Front of the line (Salesforce, Adobe)
• Model 5 - Consumables (Dollar Shave Club)
• Model 6 - Surprise box (Barkbox, Birchbox)
• Model 7 - Simplifier model
• Model 8 - Network model (Zipcar)
• Model 9 - Peace of mind model with usage-based pricing
• Lightning round
• Best advice - Focus and don't get too high or low
• Book recommendation - The E-Myth
• What makes a successful entrepreneur - stick-to-itiveness
• Productivity tool - Evernote
• Fun fact - Feel-good movie junkie
• Passion - Cycling

Resources

• Full show notes: https://saasclub.io/71
• Join 5,000+ SaaS founders: https://saasclub.io/email