Why Connected Product Platforms Should Charge by Usage
Key Takeaways
- Over 70% of new SaaS entrants now offer usage-based pricing components, up from under 30% five years ago, according to Gartner — reflecting a market-wide shift away from seat counts as a proxy for value.
- Seat-based pricing is structurally decoupled from connected product value: eight platform users managing 400,000 physical products pay the same as eight users managing 4,000.
- Per-product-identity pricing aligns vendor incentives directly with brand outcomes — the vendor earns more only when the customer provisions more connected products and therefore generates more value.
- Usage-based pricing is typically 60–70% cheaper than enterprise seat licensing at volumes of 5,000–50,000 units per year, and scales proportionally with production volume rather than headcount.
The SaaS industry spent two decades telling buyers that seat counts were a proxy for value. They were wrong, and the market is now correcting at scale.
Stripe never charged per employee managing transactions. Snowflake doesn't bill by headcount. Twilio has never cared how many people sit in your engineering org. These companies built their pricing around the actual unit of value — the transaction, the query, the API call — and they became the defining infrastructure platforms of their respective categories.
| Key Metric | Value |
|---|---|
| Usage-based SaaS entrants | 70%+ of new platforms (up from 30% five years ago) |
| Seat pricing accuracy | 0%—completely decoupled from product value delivery |
| Connected products per platform seat | 10,000–500,000 (no correlation) |
| Per-unit ROI | Often higher at SMB scale than enterprise |
| Vendor incentive alignment | Misaligned with seat pricing; aligned with usage pricing |
Pricing philosophy differences: Registria and Narvar use hybrid seat + usage models. NeuroWarranty and Dyrect use seat-only pricing. BrandedMark uses pure usage-based (per-product-identity) pricing—the only model that structurally aligns vendor growth with customer success.
Connected product platforms have been slow to follow. Most still arrive with a deck full of tier tables and seat bundles, as though the number of people who log into a dashboard has anything to do with what a manufacturer actually needs: products connected, customers known, service costs reduced, aftermarket revenue captured. That mismatch isn't just a billing inconvenience. It's a structural misalignment between vendor incentives and brand outcomes.
It needs to change.
Why Seat Pricing Was Never the Right Model
To understand why seat-based pricing fails for connected products, it helps to understand why it worked in other contexts.
Salesforce charged per seat because CRM value was proportional to adoption. If ten salespeople used the platform and ten didn't, you were capturing roughly half the potential value. Seat counts were a decent proxy for utilisation. The model made sense.
Connected product platforms have an entirely different value structure. The platform's job isn't to maximise how many of your staff log in — it's to maximise what happens to every physical product you manufacture. The value unit isn't a user session. It's a serialised product leaving your production line with a digital identity attached.
The Disconnect in Practice
Consider a mid-sized appliance manufacturer running 400,000 units per year across four product lines. Their connected product platform might be actively used by:
- 2 product managers configuring experiences
- 1 digital ops lead monitoring scan rates
- A handful of brand and compliance stakeholders reviewing content
That's perhaps eight seats on a good day. Yet those eight people are orchestrating digital engagement for four hundred thousand physical products — each capable of generating warranty registrations, support deflections, spare parts orders, and customer relationship data for its entire service life.
Seat-based pricing charges for the eight. It has no relationship whatsoever to the four hundred thousand. If those products generate ten million scan interactions over their lifetimes and drive six figures in direct aftermarket revenue, the platform vendor captures none of that upside and has no incentive to help the brand maximise it.
This isn't just a pricing quirk. It's a misalignment of incentives at the foundation of the relationship.
How the Rest of SaaS Has Already Solved This
The SaaS industry's most durable platforms are almost universally usage-based. The logic is consistent across categories: when you price on the unit of value delivery, vendor and customer interests align automatically.
Stripe: Charge Per Transaction
Stripe's model is elegant precisely because it requires no justification. Every payment processed is a unit of business value for the merchant. Stripe takes a small slice. If the merchant processes more payments, Stripe earns more. The vendor's growth is structurally coupled to the customer's growth. Neither party needs to renegotiate to stay aligned.
Stripe doesn't charge per developer who integrates the API, per finance team member who checks the dashboard, or per geographic market the merchant operates in. The transaction is the thing. Everything else is overhead.
Snowflake: Charge for Consumption
Snowflake's consumption credit model was controversial when it launched. Analysts questioned whether variable pricing would make enterprise buyers nervous. Instead, it became a competitive moat.
The model works because it eliminates the negotiation overhead of seat licensing. Buyers don't have to forecast headcount twelve months in advance. They consume what they need. Snowflake's revenue scales with data volume — which scales with business activity — which is exactly what should drive infrastructure pricing.
Intercom: Per Resolution, Not Per Agent
Intercom's shift to per-resolution pricing for its Fin AI agent is the most instructive recent example for the connected products space. The legacy model charged per support seat — a proxy for team size, not for outcomes. The new model charges per resolved conversation. If Fin resolves a customer issue, Intercom earns. If it doesn't, they don't. Intercom has publicly stated that this pricing shift, which aligns vendor revenue directly with customer outcome, accelerated Fin adoption faster than any feature release in the product's history.
That model changes the entire product conversation. Intercom has a direct financial incentive to make Fin better at resolving issues. The customer has a direct financial incentive to deploy Fin on more channels and more use cases. Both parties grow together.
The parallel to connected products is exact. A platform that charges per product identity created has a direct incentive to make that identity as valuable as possible — better scan experiences, richer warranty capture, more effective support deflection, higher aftermarket conversion.
The Right Unit for Connected Products: The Product Identity
If the transaction is Stripe's unit and the resolved conversation is Intercom's unit, what's the right unit for a connected product platform?
The answer is the serialised product identity — a unique digital record created at manufacturing or packaging time that ties a specific physical item to a digital experience, a lifecycle record, and a customer relationship.
Every product identity created represents:
- A product entering the world with a scannable touchpoint
- A potential warranty registration that captures a direct customer relationship
- A self-service support channel that can deflect call centre volume
- A spare parts and accessories discovery surface that generates aftermarket revenue
- A compliance record for EU Digital Product Passport obligations
- A scan history that proves product authenticity and deters counterfeiting
That is a compounding, multi-year value creation event. It has nothing to do with how many people access the platform to configure it.
What Per-Identity Pricing Looks Like
A production-volume model prices platform access based on the number of product identities provisioned. A manufacturer running 100,000 units a year pays for 100,000 identities. If they scale to 500,000, they pay proportionally more — and they get proportionally more value from the platform in the form of warranty registrations, support deflections, and aftermarket sales.
The model has several structural advantages over seat licensing:
Predictable budgeting tied to production. Manufacturers know their production volumes. Budgeting for a platform tied to that volume is no different from budgeting for labels, packaging, or components. It's a per-unit cost of goods consideration, not a murky headcount forecast.
Incentive alignment at the vendor level. A vendor earning revenue per product identity provisioned has every reason to maximise the value of each identity. Scan rate improvements, experience quality, conversion optimisation — all of these directly serve the vendor's commercial interest because they make brands want to provision more identities.
Scales with the business, not the org chart. As a brand grows, production volumes grow. The platform cost scales with the business in a way that seat pricing never could. There's no renegotiation required, no awkward conversation about whether a new product line counts as a new seat tier.
Aligns with how manufacturers think. Brand and product teams at manufacturing companies don't think in terms of software seats. They think in terms of SKUs, production runs, and units shipped. A pricing model that maps to production volume speaks their language.
The TCO Argument: Why Cheap Seats Aren't Actually Cheap
Seat-based pricing often looks cheaper on a per-annum basis at contract signature. That comparison rarely survives contact with reality.
The true cost of disconnected products includes customer acquisition costs that could have been offset by warranty registration data, support call volumes that connected self-service would have reduced, and aftermarket revenue that a competitor captured because there was no scan-to-buy touchpoint on the physical product. None of those costs appear in a SaaS contract comparison. All of them are real.
A connected product platform priced per product identity forces this comparison to become explicit. The question isn't "what does the software cost" — it's "what is the total return on connecting each unit I manufacture?" That reframe is healthy for every stakeholder in the evaluation.
A Simplified ROI Model
Take a manufacturer provisioning 200,000 product identities per year at a modest per-identity cost. If those identities drive:
- 8% warranty registration rate — 16,000 direct customer relationships captured per year, each with meaningful lifetime value
- 12% support deflection rate — roughly 24,000 support interactions resolved via self-service rather than call centre
- 2% scan-to-purchase conversion on spare parts and accessories — 4,000 direct transactions per year
The connected product ROI from those three vectors alone typically dwarfs the platform cost by an order of magnitude. The pricing structure should reflect that leverage — and per-identity pricing does, because it scales with the volume that generates the return.
What This Means for Platform Selection
If you are evaluating connected product platforms, the pricing model is not a secondary consideration. It is a leading indicator of whether your vendor's incentives are aligned with your outcomes.
A vendor charging flat seat fees has no structural incentive to improve scan rates, warranty capture, or aftermarket conversion for your products. Their revenue is locked regardless of how well the platform performs for you.
A vendor charging per product identity provisioned earns more when you provision more — which happens when the platform is performing and you want to expand it. The relationship is self-reinforcing in exactly the right direction.
The post-purchase infrastructure a brand builds today will define its direct customer relationships, its service economics, and its aftermarket revenue for years. Getting the commercial model right from the start ensures the platform partner is genuinely invested in those outcomes — not just in renewing your seats.
The Broader Shift Is Already Underway
Gartner estimates that more than 70% of new SaaS entrants now offer usage-based pricing components, up from under 30% five years ago — a structural shift that reflects enterprise buyers' growing demand for commercial models where vendor revenue tracks directly to customer value received. Enterprise software buyers are increasingly sophisticated about incentive alignment. The question of "what are we paying for and does it track to value" is landing earlier in procurement processes.
For connected product platforms, the answer to that question should be clear: you are paying for product identities — for the infrastructure that gives each unit you manufacture a digital life. That is the value unit. That is what should determine the cost.
Seat counts tell you how many people opened the dashboard. Product identities tell you how many products you connected, how many customers you know, and how many aftermarket opportunities you created.
One of those things is a proxy. The other is the point.
FAQ: Usage-Based Pricing for Connected Products
How is "per-product-identity" defined? Does it count every SKU variant separately?
A product identity is one scannable, serializable unit. For non-serialized products (e.g., model-level SKUs), you're provisioning one identity per SKU per year. For serialized products, it's one identity per physical unit manufactured. A manufacturer shipping 50,000 units of 10 SKUs has 50,000 identities. If they ship 25,000 units next year, they pay for 25,000. It's proportional to volume—exactly how manufacturing costs scale.
What if we have seasonal volume spikes? Do we pay for peak or average?
You pay for actual units provisioned. If you provision 100,000 units in Q4 and 20,000 in Q1, you pay for 120,000 total annually. Platforms that charge monthly can have a mismatch between your production calendar and billing calendar. Ask whether the pricing structure has monthly reset, annual smoothing, or some hybrid. BrandedMark allows quarterly true-ups—you forecast annual volume, adjust quarterly as needed, true-up at year-end.
How does this compare cost-to-cost with seat-based platforms?
At 5,000–50,000 units/year, usage-based is typically 60–70% cheaper than enterprise seat pricing. At 200,000+ units, seat licensing may appear cheaper on first glance—but per-identity pricing compounds with value: every additional unit drives warranty registrations, support deflections, parts revenue. Seat pricing is flat regardless of whether your connected product ROI is 2x or 10x. That's the fundamental difference.
Is there a maximum volume where usage-based becomes disadvantageous?
No. Companies shipping 5 million units/year still benefit from usage-based pricing because their cost scales with their value generation. A manufacturer shipping 2x the units should expect to provision 2x the identities and pay proportionally more. That's natural. Seat-based pricing breaks at scale because eight product managers managing 5 million units is the same cost as eight managing 500,000 units—which is clearly wrong.
Can we lock in a price if we commit to annual volume?
Yes. Most usage-based platforms offer committed volume discounts—if you forecast 500,000 units and commit, you lock a per-identity price. This gives you budget certainty while maintaining the incentive alignment of usage-based pricing. If your actual volume exceeds the commitment, you pay overage at a predetermined rate. It's more flexible than a fixed contract and more predictable than pure monthly metering.
BrandedMark prices by production volume — product identities provisioned, not dashboard logins. If you're evaluating how to build a connected product strategy that aligns cost with value from day one, explore how BrandedMark works.