Monetizing AI? Start with the customer: Lessons from Zendesk

Zendesk recently dropped pricing for their new AI service, making big fanfare of something they call “outcome-based pricing.” And it’s a big deal, because it’s a sign of things to come.

Here’s why.

AI, as you know, is everywhere. Companies are quickly launching copilots and other AI features, and they’re wrestling with how to monetize this technology. The Subscribed Institute at Zuora analyzed GenAI pricing metrics and models from over 70 companies and found that when companies explore AI, most land on implementing it with some form of a usage pricing model.

Usage is the dominant direction for AI monetization because it’s the answer to a long list of questions that companies have on their journey with AI, including: How do you charge for something that’s still evolving? How do you price something by users, when there are no users, or worse, the AI is meant to reduce the number of people needed? And how do you make it something customers will value?

Companies that ask these questions recognize that if they don’t think about AI and how to monetize it from the customer's point of view, then whatever features and products they bring to the market are dead in the water. AI tools need to deliver tangible value, not just flashy features. If they don't solve real problems, they're not worth paying for.

Zendesk gets this. Implementing an outcome-based pricing model for its AI agents, Zendesk’s “customers will only incur costs for issues that are resolved autonomously by AI.” This pricing is a version of usage, which is a model where customers are charged based on how much of a service or product they consume. We’ve talked about this before with the example of Starbucks and their spin on usage: a prepaid, draw-down model where Starbucks card users pay incrementally for what they use, ensuring more flexibility and aligning costs with usage.

In Zendesk’s case, this is a new feature, and that comes with perceived risk. How do you know that the AI will work? This is where Zendesk was smart: Instead of pricing for all issues addressed, Zendesk only prices for successful outcomes, putting the burden on themselves, not the customer — and taking the usage model to new heights in the process.

Zendesk’s new offering and its pricing isn’t a full pivot. It’s complementary. You can see (below) that Zendesk still charges per agent for their core product.

And that’s important because consumers want options for how they engage with a business. We brought back Subscribed Weekly in March to share stories like Zendesk’s, which show that to have staying power you need a customer-centric and future-proof approach to monetization.

Modern businesses know they need a diverse and flexible approach to monetization that continuously matches ever-changing consumer demand. That means offering traditional subscriptions, usage-based pricing, add-on offers, freemium, free with ads, and other structures that customers want. This is how businesses grow. In fact, businesses with three-to-five charge models grow faster than those with fewer.

And we can’t forget: a modular monetization platform makes it possible to power all of these models, easily moving pricing options in and out as needed.

Zendesk's adoption of outcome-based pricing is a bold and forward-thinking move. It demonstrates a commitment to customer value, a willingness to embrace innovation, and a recognition that the present and future of business lies in flexibility and adaptability. The future of monetization is about delivering value, not just products, and Zendesk is leading the way.

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Disclosure: These opinions expressed are mine, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.