Per-User vs Per-Active-User Pricing: Which Model Costs More Over Time?

TL;DR

Per-user pricing costs more when your utilization drops below 70%. Per-active-user pricing becomes expensive when utilization exceeds 80%. The model that saves you money depends on one number: your active user ratio.

Quick rule: Calculate (monthly active users ÷ total licensed users). If it's under 70%, per-active-user pricing is likely cheaper; if it's over 80%, per-user pricing with negotiated discounts wins.

What Is Per-User Pricing?

Per-user pricing charges a fixed fee per user account, regardless of whether the user logs in. You pay the same amount for someone who uses the tool daily as for someone who hasn't logged in for 6 months.

How it works:

• You purchase 500 licenses at $20/user/month
• Your bill is $10,000/month, always
• Whether 500 people log in or 50, the cost stays flat

Why this definition matters: Per-user pricing creates predictable budgets but can lead to waste when adoption is inconsistent. According to Gartner research, enterprises waste 25-30% of SaaS spend on unused or underused licenses.

This model dominates enterprise software because vendors prefer guaranteed revenue. It shifts utilization risk entirely to buyers.

What Is Per-Active-User Pricing?

Per-active-user pricing charges only for users who actually use the software during a billing period. "Active" is typically defined as logging in at least once, though some vendors use feature-based activity thresholds.

How it works:

• You enable 500 users in the system
• 300 users log in during the month
• You pay for 300 active users only

Key differences from per-user pricing:

The trade-off is clear: per-active-user pricing eliminates shelfware costs but introduces budget variability and typically carries a 20-40% higher per-unit rate.

Why Does Pricing Model Choice Matter in 2025?

The pricing model you choose can swing your total cost of ownership by 30-50% over a three-year contract. Here's what changed recently.

Three shifts driving urgency:

1. Budget scrutiny intensified. CFOs now require SaaS spend management visibility before approving renewals. Pricing model choice is a line item in board presentations.
2. Usage-based pricing is growing. OpenView's 2024 report found 61% of SaaS companies now offer usage-based options, up from 45% in 2022. Buyers have more leverage to demand per-active-user terms.
3. License waste is exposed. Modern SaaS management platforms reveal that the average enterprise has 30% of its licenses dormant. This data makes per-user contracts harder to justify.

What we observed: Organizations that renegotiated to per-active-user pricing mid-contract saved an average of 22% on tools with under 60% utilization, but overspent by 15% on tools with 85%+ utilization.

The right model isn't universal. It depends on your usage patterns.

How Do You Calculate the True Cost of Each Model?

Use this formula to compare total cost over time.

Step 1: Calculate your active user ratio

Active User Ratio = Monthly Active Users ÷ Total Provisioned Users

Example: 350 active users ÷ 500 provisioned users = 70%

Step 2: Get pricing for both models

Note: Per-active-user rates are typically 30-50% higher per unit.

Step 3: Calculate annual cost

Per-user: 500 users × $20 × 12 months = $120,000/year

Per-active-user: 350 active users × $28 × 12 months = $117,600/year

Step 4: Find your break-even point

Break-even ratio = Per-user rate ÷ Per-active-user rate

Break-even = $20 ÷ $28 = 71.4%

If your active user ratio stays below 71.4%, per-active-user pricing saves money. Above that threshold, per-user pricing wins.

What fails in real life: Most organizations calculate break-even using current usage, then get surprised when a product launch or training initiative spikes active users. Always model for 20% usage increase before committing.

Want to see your actual license utilization across all SaaS tools? Request a CloudNuro demo to get real numbers.

When Does Per-User Pricing Actually Cost Less?

Per-user pricing wins in specific scenarios. Don't assume it's always the expensive choice.

Per-user pricing costs less when:

• Active user ratio exceeds 80%. High-adoption tools like Slack, Microsoft 365, or core CRM rarely have dormant users. The per-unit discount of per-user pricing pays off.
• Usage is predictable and stable. If you've tracked 12+ months of consistent usage, you can negotiate volume discounts that beat per-active-user rates.
• You need budget certainty. Finance teams planning annual budgets prefer fixed costs. The premium for predictability is sometimes worth paying.
• Vendor offers tiered discounts. At scale, per-user pricing often comes with 20-40% volume discounts that close the gap with per-active-user alternatives.

Pro tip: Negotiate a per-user contract with a license optimization clause. This lets you reduce license count quarterly without penalties, giving you per-user predictability with some flexibility.

When Does Per-Active-User Pricing Save Money?

Per-active-user pricing delivers savings in low-utilization or variable-usage scenarios.

Choose per-active-user pricing when:

• The active user ratio is under 65%. Tools used by specific teams (analytics, design, project management) often see utilization under 60%. You're paying for capacity that sits idle.
• The workforce is seasonal or project-based. Contractors, seasonal employees, or project teams create usage spikes. Paying only for active months eliminates off-cycle waste.
• You're piloting new software. Adoption is uncertain during rollouts. Per-active-user pricing lets you scale costs with actual adoption rather than projected headcount.
• Vendor consolidation is planned. If you're sunsetting a tool, per-active-user pricing lets costs decline naturally as users migrate.

Checklist before switching to per-active-user:

• Track usage for 90+ days to establish a baseline
• Model cost at 50%, 75%, and 100% utilization
• Confirm vendor's "active user" definition
• Check for minimum commitment clauses
• Calculate total cost including higher per-unit rate

What Is the Typical Active User Ratio in Enterprises?

Understanding benchmarks helps you assess whether your utilization is normal or problematic.

Industry benchmarks for active user ratios:

What we observed: The gap between provisioned and active users grows with tool complexity. Self-service tools like Slack maintain high engagement. Tools requiring training or behavior change see 40-60% dormancy.

If your ratio is 20+ points below category benchmarks, you have a license management problem, not just a pricing model problem. Fix adoption before switching pricing models.

Common Mistakes When Choosing a Pricing Model

These errors cost enterprises thousands in unnecessary spend.

Mistake 1: Ignoring the "active user" definition

Vendors define "active" differently. Some count any login. Others require feature usage. One vendor's 70% active ratio might be another's 50%.

Fix: Get the exact definition in writing before comparing quotes.

Mistake 2: Calculating break-even on current usage only

Usage changes. New hires, product launches, and training programs spike activity. Modeling only current state leads to budget surprises.

Fix: Model scenarios at current, +20%, and +40% usage before committing.

Mistake 3: Ignoring minimum commitments

Many per-active-user contracts include minimum spend clauses. If usage drops, you still pay the floor, eliminating the flexibility you wanted.

Fix: Negotiate minimum commitments at 60% of expected usage, not 80%.

Mistake 4: Not tracking usage before negotiating

You can't negotiate pricing model switches without data. Vendors will default to per-user pricing if you can't prove low utilization.

Fix: Implement usage tracking 6+ months before renewal. Check how enterprises prevent shelfware to build your data foundation.

Mistake 5: Treating all tools the same

Different tools need different models. Core productivity software benefits from per-user simplicity. Specialized tools with variable adoption benefit from per-active-user flexibility.

Fix: Segment your SaaS portfolio and apply the right model per category.

See exactly which licenses are unused across your stack. CloudNuro shows waste in 24 hours, request a demo.

How to Track Active Users Step-by-Step

You can't choose the right pricing model without accurate usage data.

Step 1: Define "active" for your organization

Create a consistent definition across all tools. Recommended: "User who logged in and performed at least one core action in the past 30 days."

Step 2: Pull usage reports from each vendor

Most enterprise SaaS tools provide admin reports showing last login dates and activity metrics. Export these monthly.

Step 3: Centralize data in a single view

Spreadsheets work for 5-10 tools. Beyond that, you need a SaaS management platform to correlate usage across your portfolio.

Step 4: Calculate ratios monthly

Track active user ratio trends over 6-12 months. Seasonal patterns and project cycles affect the data.

Step 5: Segment by tool category

Group tools by function and compare ratios against benchmarks. Flag tools with ratios 20+ points below category average.

Step 6: Build your negotiation case

Use 6+ months of data to request pricing model changes at renewal. Vendors take data-backed requests seriously.

Refresh Checklist for Pricing Model Evaluation

Use this checklist quarterly or before any major renewal.

• Pull active user data for past 90 days
• Calculate active user ratio for each tool
• Compare ratio against category benchmarks
• Identify tools with under 65% active ratio (per-active-user candidates)
• Identify tools with over 80% active ratio (per-user candidates)
• Model 3-year cost under both pricing models
• Check current contract for minimum commitments
• Review vendor's "active user" definition
• Document seasonal usage patterns
• Prepare negotiation brief with usage data

Want CloudNuro to run this analysis automatically? See how it works in a live demo.

FAQ

What is per-user pricing in SaaS?

Per-user pricing charges a fixed fee for every user account, regardless of whether that user logs in or uses the software. You pay the same amount for active and inactive users.

What is per-active-user pricing?

Per-active-user pricing charges only for users who actually use the software during a billing period. Inactive users don't generate costs.

Which pricing model is cheaper?

It depends on your active user ratio. Per-active-user pricing saves money when utilization is under 70%. Per-user pricing wins when utilization exceeds 80% and you've negotiated volume discounts.

How do I calculate my active user ratio?

Divide monthly active users by total provisioned users. Example: 300 active ÷ 500 total = 60% active user ratio.

What is a good active user ratio?

It varies by software category. Communication tools should hit 85-95%. Specialized tools like analytics or design may run 40-60%. Compare your ratio against category benchmarks.

Can I negotiate hybrid pricing?

Yes. Some vendors offer per-user pricing up to a threshold, then per-active-user pricing beyond it. This gives budget predictability with upside protection.

How do vendors define "active user"?

Definitions vary. Some count any login. Others require specific feature usage. Always get the exact definition in writing before signing.

Should I switch all tools to per-active-user pricing?

No. Segment your portfolio. High-adoption core tools benefit from per-user volume discounts. Low-utilization specialized tools benefit from per-active-user flexibility.

How does pricing model affect SaaS renewals?

Usage data gives you negotiation leverage. If you can prove 50% of licenses are dormant, you can demand per-active-user pricing or significant per-user discounts. Learn more about mastering SaaS negotiation.

What are hidden costs of per-active-user pricing?

Higher per-unit rates, minimum commitment clauses, and usage tracking overhead. Model total cost carefully before switching.

How long should I track usage before changing pricing models?

Track for at least 6 months to capture seasonal patterns and get reliable averages. 12 months is ideal for annual contract negotiations.

How do I present pricing model analysis to my CFO?

Lead with total cost comparison over the contract term. Show current waste from dormant licenses, projected savings from model switch, and break-even analysis. Include ROI projections for credibility.

Conclusion

Per-user pricing and per-active-user pricing aren't universally good or bad. The right choice depends on one metric: your active user ratio.

Calculate your ratio. Compare it against the break-even point (typically 70-75%). Model costs under both scenarios over your full contract term.

For high-adoption tools, per-user pricing with volume discounts wins. For low-utilization tools, per-active-user pricing eliminates waste. Segment your SaaS portfolio and apply the right model to each category.

Track usage continuously. Pricing model decisions made without data are just guesses, expensive ones.

About CloudNuro

CloudNuro is a leader in Enterprise SaaS Management Platforms, giving enterprises unmatched visibility, governance, and cost optimization.

Recognized twice in a row by Gartner in the SaaS Management Platforms Magic Quadrant (2024, 2025), and named a Leader in the Info-Tech SoftwareReviews Data Quadrant, CloudNuro is trusted by global enterprises and government agencies to bring financial discipline to SaaS, cloud, and AI.

Trusted by enterprises such as Konica Minolta and Federal Signal, CloudNuro provides centralized SaaS inventory, license optimization, and renewal management, along with advanced cost allocation and chargeback, giving IT and Finance leaders the visibility, control, and cost-conscious culture needed to drive financial discipline.

As the only Enterprise SaaS Management Platform built on the FinOps framework, CloudNuro brings SaaS and IaaS management together in a single unified view. With a 15-minute setup and measurable results in under 24 hours, CloudNuro gives IT teams a fast path to value.

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