Why should your subscription business opt for usage based billing?Featured • June 24, 2021
Customers want usage-based billing in the subscription business!
But before we move ahead, let’s discuss how technology has grown in the past decade. Subscription business a few decades ago was limited to utility-based items like water, electricity, newspapers, etc.
Now, subscription-based businesses are everywhere. Entertainment, Fitness, Education, Marketing, Medical, Payroll, and much more. In short, everything around us is subscription-based. This helps people avail products and services at their convenience.
This is how technology has grown and now helped subscription businesses to prosper. As we move forward, subscription businesses are growing. Earlier, the subscription business followed a fixed payment model. Here, the customer pays a fixed amount monthly or annually.
But now, subscription businesses are ready to offer a pay-as-you-go model. We also know it as usage-based billing. This brings us to the crucial question.
What is usage-based billing in a subscription business?
Usage-based billing in a subscription business is offering services and accepting payments as per the customer’s usage. Let us understand this via an example.
ABC ltd offers a fixed monthly recurring cost of $9.99 per month. Recently, they began a usage-based model where customers pay as per their usage, $1 for every 24 hours of streaming.
So when Mr. X used the service for 120 hours in a month, he got a bill of $5 (120 hours = 5 days). This way, he ends up paying lesser than the fixed charge of $9.99 per month.
What are the advantages of usage-based billing? 4 points (100 words and 2 paras)
- Customers love paying less:
Less is more for customers. If you ask customers to pay less, they often like your service. Also, most of your customers have a budget. If you offer a usage-based service, customers can track their usage and bill in real-time. Budget customers will use as per their affordability and will stop when the amount crosses the budget threshold.
Giving customers an opportunity like this can help your business grow simultaneously and transform into a market leader.
- Technology supports real-time usage tracking:
Tracking usage today is possible thanks to the advancement in the internet of things (IoT) and technology overall. They can use this in subscription businesses and companies offering software as a service (Saas).
As technology surpasses with each passing day, any subscription business can track customer usage in real-time. They can charge customers accordingly as per their usage.
- Offering this method benefits small businesses:
It is not just customers who benefit from this arrangement. Small businesses and start-ups that need services to run their business will benefit from usage-based billing. As they only have to pay for their usage, it helps such organizations use the extra funds to grow their business.
As a subscription business, you can target such small businesses and offer your product or service. This way, you can generate revenue and help small businesses to grow.
- Can attract more new customers and increase your monthly revenue:
Do you know the crucial benefit of applying a pay-as-you-use method for any business? You generate an opportunity to attract new customers and keep old customers, too. Yes, offering a service that satisfies customers often leads to them renewing their subscription and spreading the good word.
The direct impact of this will show on your revenue. Multiple subscription businesses state that offering such a payment option for customers ends in increasing their monthly revenue.
Analytics help you position your product well:
What if you can find out which locations favor pay-as-you-use? Using analytics and insights on your subscription management software, you can find out multiple things. These include average usage of men, women, specific age-group, and locations where the business needs to improve.
Doing your research on locations that are not doing well is another way you can improve your service. This can lead to maximizing your revenue levels.
What are the challenges in usage-based billing?
Apart from the advantages, there are a couple of challenges you have to face as well. One of them is tracking. Yes, it is possible to track. But as your customer base grows, tracking and analyzing will get complex. Second, there are chances of errors that can take place if the subscription management software is not acceptable.
Hence, the challenge here will be to find the best subscription management software for your business.
Which recurring billing software is best for usage-based billing?
The best software for a subscription business to handle usage-based billing is ChargeMonk.
What is ChargeMonk?
ChargeMonk is automated billing software for subscription businesses. We help recurring business models recover lost revenue and manage their subscription business seamlessly.
How can ChargeMonk help your subscription business model?
Over the years, ChargeMonk has understood industry trends and all the daily problems that a subscription business can face. Keeping these in mind, we came up with the best subscription management software. This is an all-in-one solution for your subscription business that will help you save time, effort, and money!
If this is what you want for your secure subscription business, do connect with us today and get a FREE TRIAL! Click here for more details!