In the consumption-based model, costs are directly correlated with the amount of cloud resources used. There is no need for capital expenditure on hardware, and costs can be scaled up or down based on actual usage, aligning with the 'pay-as-you-go' structure. This is beneficial for companies as it offers flexibility and scalability without significant upfront costs. The 'pay-in-advance' model would not be a consumption-based approach since costs are not directly tied to usage. Fixed monthly fees and one-time payments are also not reflective of the consumption-based model as they do not vary with usage but are predetermined costs.