What is consumption-based pricing?
A consumer-based pricing model is based on the basic philosophy that customers pay based on the amount of services they use or consume. This is one of the most popular pricing models for cloud computing services and other types of IT provider services.
The consumption-based pricing approach is pretty straightforward. Provider companies quantify the services they provide and charge customers according to their use. For example, a message service may charge per message. Services that are provided in real time can be billed by the minute or by the hour. This is comparable to the types of setups that were common in primitive internet cafes, where cafe owners charged per minute or hour for ISPs' use of broadband services.
As the main pricing model, consumption-based pricing competes with what is known as subscription-based pricing. A subscription-based pricing model means that customers simply sign up for web services on a daily, monthly or yearly basis. Here customers are not charged per usage, but per unit of time as they are subscribed to through their services. In other words, customers enjoy unlimited service for one flat fee within the timeframe of their subscription.