Definition
Unit cost is the cost to deliver one measurable unit of usage such as an API call, event, GB, or minute.
Why it matters
Unit cost is the anchor for margin-safe pricing in usage-based models and for evaluating discounts.
Pricing implications
Set unit prices to cover unit cost at target margins, with tiers that match cost decreases at scale.
Measurement tips
Use blended vendor rates, include support and compute time, and validate with p90 usage profiles.
Checklist
- Define the unit of usage clearly.
- Include all variable costs tied to usage.
- Separate shared overhead from unit cost.
- Model unit cost by region and product line.
- Compare unit price to unit cost monthly.
- Recalculate after infrastructure changes.
- Track unit cost trends over time.
- Document formulas and assumptions.
Examples
- .0006 per API call based on infra and vendor costs.