What are AI pricing models?

AI pricing models are the units a software vendor charges against instead of per user. The main ones are usage or token-based, application or entity-based, outcome-based, and hybrid combinations. Vendors move off per-seat pricing because AI reduces the customer's headcount, so seat-linked revenue falls as the product succeeds. Kevin Surace calls the seat a unit that both sides now want reduced.

How do you price software when your product reduces the customer's headcount?

Price against a unit that grows as headcount shrinks. Kevin Surace uses applications at Appvance, charging $150,000 a year for up to five applications with unlimited users. The customer's largest cost is people rather than software. A vendor removing headcount can therefore justify a higher price, not a lower one.

What are the 7 types of pricing strategies?

The commonly cited set is cost-plus, value-based, competitive, penetration, skimming, freemium and dynamic pricing. For AI software the working set narrows to seat-based, usage or token-based, activity-based, output-based, outcome-based and hybrid. Surace argues the seat-based option is the one that no longer holds. He runs application-based pricing at Appvance, which sits inside the entity-based family.

Should you drop per-seat pricing entirely?

Not immediately, and Surace does not recommend it. He runs a dual model instead. He keeps a seat option for customers who buy that way, while AI users move to usage or application pricing. Salesforce operates three Agentforce models concurrently for the same reason. The track a customer sits on depends on whether the product is cutting their headcount.

How can you tell whether a vendor's AI is real or repackaged?

Ask which models they use, how they use them, and how that use produces a measurable gain. If the answer describes a co-pilot delivering incremental percentage gains, the AI is an add-on. The bar to clear is roughly tenfold. A vendor whose seat count rises every month is a second signal.

What is the 30% rule in AI?

The term is used inconsistently and has no authoritative definition. In pricing discussions it usually refers to holding roughly 30% gross margin headroom above inference and compute costs, so a usage-based price survives model cost swings. Treat any single stated version with caution. Surace's own guidance is to model tokens and server usage, then price a margin you own. Related Resources - Enterprise AI Adoption: 1,000 Seats, One Daily Login - Vertical AI: What You Sell When the Model Costs Cents - Competing on Price? The Deal Was Lost Six Months Earlier

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AI Pricing Models: Charge More for Cutting Their Costs

September 9, 2026