Cut Your AI Costs

Guide the user through reducing AI API costs without sacrificing quality. Multiple strategies, from quick wins to advanced techniques.

Step 1: Understand where the money goes

Ask the user:

•Which provider/model are you using? (GPT-4o, Claude, etc.)
•How many API calls per day/month?
•Is there a specific module or step that's most expensive?

Quick cost audit

python

import dspy

# Run your program and check token usage
lm = dspy.LM("openai/gpt-4o-mini")
dspy.configure(lm=lm)

result = my_program(question="test")
dspy.inspect_history(n=3)  # Shows token counts per call

Step 2: Quick wins

Use a cheaper model everywhere

The simplest fix — switch to a cheaper model and see if quality holds:

python

# Instead of GPT-4o (~$5/M input tokens)
lm = dspy.LM("openai/gpt-4o-mini")  # ~$0.15/M input tokens — 33x cheaper

# Or use an open-source model
lm = dspy.LM("together_ai/meta-llama/Llama-3-70b-chat-hf")

Always measure quality before and after with /ai-improving-accuracy. When you switch models, re-optimize your prompts — they don't transfer. See /ai-switching-models for the full workflow.

Enable caching

DSPy caches LM calls by default. Make sure you're not disabling it:

python

# Caching is ON by default — same inputs won't re-call the API
lm = dspy.LM("openai/gpt-4o-mini")  # cached automatically

# To verify caching is working, run the same input twice
# and check that the second call is instant

Step 3: Use different models for different tasks

Not every step in your pipeline needs the expensive model. Use dspy.context or set_lm to assign cheaper models to simpler steps:

python

expensive_lm = dspy.LM("openai/gpt-4o")
cheap_lm = dspy.LM("openai/gpt-4o-mini")

dspy.configure(lm=expensive_lm)  # default

class MyPipeline(dspy.Module):
    def __init__(self):
        self.classify = dspy.ChainOfThought(ClassifySignature)
        self.generate = dspy.ChainOfThought(GenerateSignature)

    def forward(self, text):
        # Use cheap model for simple classification
        with dspy.context(lm=cheap_lm):
            category = self.classify(text=text)

        # Use expensive model only for complex generation
        return self.generate(text=text, category=category.label)

Per-module LM assignment

python

# Set LM on specific modules permanently
my_program.classify.lm = cheap_lm
my_program.generate.lm = expensive_lm

Step 4: Smart routing — cheap model for easy inputs, expensive for hard ones

Instead of sending everything to the expensive model, classify inputs by difficulty and route accordingly. This is the pattern behind FrugalGPT (up to 90% cost savings matching GPT-4 quality):

Route by complexity

python

class ComplexityRouter(dspy.Module):
    def __init__(self):
        self.assess = dspy.Predict(AssessComplexity)
        self.simple_handler = dspy.Predict(AnswerQuestion)
        self.complex_handler = dspy.ChainOfThought(AnswerQuestion)

    def forward(self, question):
        # Use the cheap model to decide complexity
        with dspy.context(lm=cheap_lm):
            assessment = self.assess(question=question)

        # Route to the right model
        if assessment.complexity == "simple":
            with dspy.context(lm=cheap_lm):
                return self.simple_handler(question=question)
        else:
            with dspy.context(lm=expensive_lm):
                return self.complex_handler(question=question)

class AssessComplexity(dspy.Signature):
    """Assess if this question needs a powerful model or a simple one can handle it."""
    question: str = dspy.InputField()
    complexity: Literal["simple", "complex"] = dspy.OutputField(
        desc="simple = factual/straightforward, complex = reasoning/nuanced"
    )

Cascading — try cheap first, fall back to expensive

python

class CascadingPipeline(dspy.Module):
    def __init__(self):
        self.answer = dspy.ChainOfThought(AnswerQuestion)
        self.verify = dspy.Predict(CheckConfidence)

    def forward(self, question):
        # Try cheap model first
        with dspy.context(lm=cheap_lm):
            result = self.answer(question=question)
            check = self.verify(question=question, answer=result.answer)

        # If cheap model isn't confident, escalate to expensive
        if not check.is_confident:
            with dspy.context(lm=expensive_lm):
                result = self.answer(question=question)

        return result

class CheckConfidence(dspy.Signature):
    """Is this answer confident and complete, or should we escalate to a better model?"""
    question: str = dspy.InputField()
    answer: str = dspy.InputField()
    is_confident: bool = dspy.OutputField()

Typical savings: 50-90% cost reduction. Most real-world traffic is simple questions that a cheap model handles fine.

Step 5: Reduce prompt length

Long prompts = more tokens = more cost.

Reduce few-shot examples

python

# Fewer demos = shorter prompts = lower cost
optimizer = dspy.BootstrapFewShot(
    metric=metric,
    max_bootstrapped_demos=2,   # down from 4
    max_labeled_demos=2,        # down from 4
)

Reduce retrieved passages

python

# Fewer passages = shorter context
class DocSearch(dspy.Module):
    def __init__(self):
        self.retrieve = dspy.Retrieve(k=2)  # down from 5
        self.answer = dspy.ChainOfThought(AnswerSignature)

Simplify signatures

python

# Verbose — costs more tokens
class Verbose(dspy.Signature):
    """Given the following text, carefully analyze the content and provide a detailed classification."""
    text: str = dspy.InputField(desc="The full text content to be analyzed and classified")
    label: str = dspy.OutputField(desc="The classification label for this text")

# Concise — same quality, fewer tokens
class Concise(dspy.Signature):
    """Classify the text."""
    text: str = dspy.InputField()
    label: str = dspy.OutputField()

Step 6: Fine-tune a cheap model (advanced)

The biggest cost saver: train a small cheap model to do what the expensive model does. Distill from an expensive teacher to a cheap student:

python

# Build and optimize with the expensive model, then fine-tune a cheap one
optimizer = dspy.BootstrapFinetune(metric=metric, num_threads=24)
finetuned = optimizer.compile(my_program, trainset=trainset, teacher=teacher_optimized)

Requirements: 500+ training examples, a fine-tunable model. Typical savings: 10-50x cost reduction with 85-95% quality retention.

For the complete model distillation workflow (decision framework, prerequisites, BetterTogether, troubleshooting), see /ai-fine-tuning.

Step 7: Use `Predict` instead of `ChainOfThought` where possible

ChainOfThought adds a reasoning step which uses extra tokens. For simple tasks, Predict may be sufficient:

python

# ChainOfThought — more tokens, better for complex tasks
classifier = dspy.ChainOfThought(ClassifySignature)

# Predict — fewer tokens, fine for simple tasks
classifier = dspy.Predict(ClassifySignature)

Test with /ai-improving-accuracy to make sure quality doesn't drop.

Cost reduction checklist

•Switch to a cheaper model (measure quality first)
•Verify caching is enabled
•Use cheap models for simple steps, expensive for complex
•Route easy inputs to cheap models, hard ones to expensive (Step 4)
•Reduce few-shot examples (2 instead of 4)
•Reduce retrieved passages
•Use Predict instead of ChainOfThought for simple tasks
•Fine-tune a cheap model for production (if 500+ examples available)

Additional resources

•Use /ai-building-pipelines to design multi-step systems with per-stage model assignment
•Use /ai-improving-accuracy to make sure quality holds after cost cuts
•Use /ai-fixing-errors if things break during cost optimization

Cut Your AI Costs

Step 1: Understand where the money goes

Quick cost audit

Step 2: Quick wins

Use a cheaper model everywhere

Enable caching

Step 3: Use different models for different tasks

Per-module LM assignment

Step 4: Smart routing — cheap model for easy inputs, expensive for hard ones

Route by complexity

Cascading — try cheap first, fall back to expensive

Step 5: Reduce prompt length

Reduce few-shot examples

Reduce retrieved passages

Simplify signatures

Step 6: Fine-tune a cheap model (advanced)

Step 7: Use Predict instead of ChainOfThought where possible

Cost reduction checklist

Additional resources

Step 7: Use `Predict` instead of `ChainOfThought` where possible