LLM cost optimization for real products

LLM features are cheap to prototype and surprisingly expensive to run at scale. A demo that costs pennies becomes a five-figure monthly bill once real users arrive, because every request pays per token and it's easy to send far more tokens than you need. The good news: most AI bills are bloated, and a handful of tactics reliably cut them without users noticing any drop in quality. Right-size the model per task The most expensive mistake is using your biggest, smartest model for everything. Most work in a product doesn't need it. Route by difficulty: Small, fast models for classification, extraction, routing, and simple rewrites. Frontier models only for genuinely hard reasoning or high-stakes output. Implement a model router : a cheap first pass decides how hard the task is, and only the hard cases escalate to the premium model. This single change often cuts spend dramatically because the long tail of easy requests stops paying frontier prices. Cache aggressively Many requests are repeats or near-repeats. Don't pay twice: Exact-match caching — identical prompts return a stored response instantly and for free. A simple PostgreSQL or Redis lookup keyed on the request works. Prompt caching — most providers let you cache a large, stable prefix (system prompt, retrieved context) so you're only billed full price for the changing part. Semantic caching — for questions that are similar but not identical, match on embeddings and reuse an answer when confidence is high. Trim the tokens You pay for every token in and out, so waste is literal money: Compress prompts. Cut boilerplate, redundant instructions, and bloated few-shot examples. Shorter prompts that keep quality are pure savings. Retrieve less, better. In RAG, don't stuff twenty chunks in when three well-chosen ones answer the question. Re-rank and send only what's needed. Cap output. Ask for concise responses and set a max length; unbounded generations quietly inflate bills. Batch and stream For work that isn't real-t