Minimum commitment pricing asks customers to commit to a minimum spend or usage, such as hours, transactions, credits or seats, for a fixed term, usually 12 months, in exchange for a lower rate than pay-as-you-go. It turns unpredictable usage into recurring revenue, lets you recover acquisition costs, and works best when your service becomes profitable at a known usage level.
Key takeaways
- Minimum commitment fixes the 'feast or famine' problem of pure usage pricing.
- Zendesk charges $1.50 per AI resolution on commitment and $2.00 pay-as-you-go, a clear example of the trade.
- Set the minimum to recover what it costs you to win and serve the customer, and let the rate do the selling.
- Make the commitment unmissable. Adobe's buried early-exit fee ended in a $150 million settlement in 2026.
Years ago I was the government national sales manager for a telecommunications company.
We had a usage-based pricing model. One month, a government customer made a crazy number of conference calls during an election and spent a lot of money with us.
We celebrated.
The next month, their spending dropped off a cliff. We panicked.
That's feast or famine, and it's the big downside of pure usage pricing when what you want is predictable recurring revenue. Minimum commitment is how you keep the fairness of usage pricing without riding the roller coaster.
What Is Minimum Commitment Pricing?
The customer commits to buying a certain amount of a product, or using a certain amount of a service, over a set period. In exchange, they get a discount.
We see this all the time in energy. Retailers commit to buying a set amount of gas or electricity from producers. That gives them lower wholesale prices so they can profit from reselling. The producer gets a recurring revenue stream that covers its infrastructure.
Closer to home, I used Stripe as the book's example. Once a business is processing a reasonable volume, Stripe has often been willing to offer a lower rate in exchange for a 12-month commitment. In other words: stick with us for the next year and we'll take less of your money.
Both sides win. The business keeps more of each sale. Stripe gets a committed customer it knows will process a decent volume for at least a year. And Stripe kept compounding: businesses on Stripe processed $1.9 trillion in 2025, up 34%, and a February 2026 tender offer valued it at $159 billion.
Minimum Commitment Examples in 2026
The model is everywhere once you start looking, especially as usage and AI pricing spread. Prices below were checked in October 2026.
| Company | Pay-as-you-go | With commitment |
|---|---|---|
| Zendesk (AI resolutions) | $2.00 per automated resolution | $1.50 per resolution, committed |
| Stripe Billing | 0.7% of billing volume | Annual contracts from $620 a month |
| Snowflake | From $2.00 per credit on demand | Discounted prepaid capacity on an annual commitment |
| turbopuffer | Usage per GB and query | Tier minimums of $16, $256 and $4,096 a month |
| Anthropic (Claude Enterprise) | n/a | $20 per seat plus usage, 20-seat minimum |
| Panera Sip Club | $14.99 a month ($179.88 a year) | $119.99 for an annual plan |
There's also a big-company version. Salesforce sells a fixed-price, multi-year "Agentic Enterprise License Agreement" for unlimited use of named AI products, and reported that these grew from 16 to more than 120 in one quarter. Enterprise buyers who are nervous about meters will pay for certainty.
Who Should Use Minimum Commitment (and Who Shouldn't)?
In the book I said this model works best when your product or service becomes profitable at a set usage level. You want customers to reach that level. So instead of offering standard usage and hoping, you have them commit to it.
It suits you if:
- You sell usage-based services with real fixed costs behind them (staff, infrastructure, capacity).
- Acquiring a customer is expensive and you need time to earn it back. The book's tip: set the minimum to claw back what you spent acquiring the customer.
- Your customers are businesses that budget annually and value a predictable bill.
- You're adding AI features and need to know usage will cover your model costs.
It's a poor fit when:
- Customers' usage is genuinely unpredictable and they'd be guessing.
- You sell to consumers who are wary of lock-ins and have plenty of alternatives.
- You can't deliver enough value to make tying themselves into a contract worth it.
A Sample Minimum Commitment Offer
An illustrative offer for an IT support provider (the book notes IT service desks often use minimum commitment contracts). Prices exclude GST and are examples only.
| Pay as you go | Commit 10 | Commit 25 | |
|---|---|---|---|
| Term | None | 12 months | 12 months |
| Monthly minimum | None | A$990 (10 hours) | A$2,250 (25 hours) |
| Effective hourly rate | A$120 | A$99 | A$90 |
| Extra hours | A$120 | A$99 | A$90 |
| Unused hours | n/a | Roll over one month | Roll over one month |
| Response time | Best effort | 4 business hours | 2 business hours |
| Quarterly review | No | No | Yes |
Overage at the committed rate, a short rollover and a faster response time all make committing feel like a deal rather than a trap.
How big should the discount be?
The Annual Discount Calculator shows how much of a discount a 12-month commitment can carry and still beat monthly churn.
How Do You Set the Minimum and the Discount?
Start from your costs and the customer's history, not from a number that sounds nice.
Minimum commitment ≥ (Cost to acquire and onboard the customer ÷ Term in months) + Monthly cost to serve at the committed level
Worked example: the Commit 10 plan
Winning and onboarding a new business client costs the IT provider about A$1,800 (sales time, setup, documentation). Spread over 12 months, that's A$150 a month. Ten hours of a technician costs about A$55 an hour fully loaded, so A$550. Add A$60 for tools and licenses. The floor is about A$760 a month. At A$990 the provider earns about A$230 a month above that floor, while the customer saves A$210 a month against pay-as-you-go. If the customer uses only seven hours one month, the provider still covers its costs, and the customer can roll the unused three into next month.
A few rules for the discount:
- Make it obvious. 10% to 25% off pay-as-you-go is typical. Zendesk's gap is 25%.
- Step it with volume. Bigger commitments earn better rates, which gives growing customers a reason to commit more.
- Check it against churn. If monthly customers stay for years anyway, a big discount just gives money away. The Annual Discount Calculator tests this.
For the broader trade-offs, read annual vs monthly plans.
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What Are the Risks of Minimum Commitment?
Breakage resentment. Customers who pay for a lot they don't use feel cheated, even if they agreed to it. Watch usage against commitment, and call anyone tracking well under before renewal.
The renewal "bear." One of the best sales professionals I worked with called the annual renewal "poking the bear." Every renewal is a fresh decision. Earn it all year.
Hidden exit fees. Adobe pre-selected an "annual, paid monthly" plan, showed the monthly price, and charged an early termination fee of 50% of the remaining payments if customers cancelled in year one. The US government alleged the fee was buried in fine print. In March 2026 Adobe agreed to a $150 million settlement. Read the Adobe case study.
Australian law. Unfair terms in standard form contracts with consumers and small businesses have been illegal, with penalties, since 9 November 2023. A small business here means fewer than 100 employees or turnover under A$10 million. Exit fees, automatic renewals and one-sided variation clauses are worth reviewing. See unfair contract terms and automatic renewals in Australia. From 1 July 2027, new subscription rules also require notices during the subscription (renewal reminders are expected once regulations set the timing) and an easy way to cancel. This is general information as at October 2026, so get legal advice on your own contracts.
How Do You Combine Minimum Commitment With Other Models?
This model rarely stands alone. It's usually the safety net under another one.
- Usage-based pricing with a minimum is the book's Model #16: customers get usage pricing, you get a floor. See usage-based pricing.
- SaaS with annual contracts and committed seats is standard in B2B software.
- Hybrid plans combine a committed base fee with included usage and overage. See hybrid pricing.
- Bundled services with a 12-month term protect you when expensive work is delivered early.
- Consumables for business (office coffee, cleaning supplies) work well with a committed monthly volume.
Not sure which structure suits you? The Pricing Model Picker walks you through it.
What to Do Next
- Pull 12 months of usage for your top 20 customers. Find the ones with steady, predictable spend.
- Work out your floor: acquisition cost spread over the term, plus cost to serve.
- Design two or three commitment levels with clear rates, rollover and overage.
- Put the term, the minimum and any exit fee in the headline of your offer, not a link.
- Offer it to your steadiest customers first, using their own numbers.
So, here's the question: which of your customers would happily commit for a year if you made it worth their while?
Frequently asked questions
What happens if a customer doesn't use their minimum commitment?
Usually they still pay the minimum. Unused value is often called 'breakage.' Some breakage is normal, but customers who pay for a lot they don't use tend to cut their commitment, or leave, at renewal. Many businesses soften it by letting unused units roll over for a month or two, or by checking in when a customer is tracking well below their minimum.
What happens if a customer goes over the minimum?
Charge overage at the committed rate, or close to it. Punitive overage rates feel like a trap and push customers to shop around. Use the overage as a signal instead: a customer who exceeds their minimum three months in a row is ready for a bigger commitment at a better rate.
Is a 12-month contract billed monthly a minimum commitment?
Yes. 'Annual, paid monthly' is a 12-month commitment with monthly payments, and you should present it that way. Adobe's version, with an early termination fee of 50% of the remaining payments, drew a US government lawsuit that settled for $150 million in March 2026. Put the term and any exit fee next to the price.
Do consumer businesses use minimum commitments?
Yes, though usually more lightly than B2B. Gyms with 12-month contracts, phone plans and Panera's annual drinks plan are all versions of it. Panera prices its monthly plan at $14.99 and its annual plan at $119.99, which nudges members toward the commitment. Consumers are warier of lock-ins, so keep terms short and exits clear.
How do I move existing pay-as-you-go customers onto commitments?
Show each customer their own last 12 months of spend, then offer a commitment slightly below it at a better rate. Most will see they'd save money for no change in behavior. Start with your steadiest, highest-volume customers, and never force the switch. Keep pay-as-you-go available for customers who value flexibility.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- Stripe: 2025 annual letter and tender offer (24 February 2026)
- Stripe Billing pricing (accessed October 2026)
- Zendesk pricing (accessed October 2026)
- US Department of Justice: Adobe agrees to $150 million settlement (13 March 2026)
- ACCC: Businesses urged to remove unfair contract terms ahead of law changes
- Restaurant Dive: Panera adds limits to Sip Club (14 July 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.