For businesses looking to grow the bottom line, while providing ongoing value to customers and making accurate forecasts, recurring revenue is the gold standard. But recurring revenue is not a one-size-fits-all billing model. In fact, it can take on countless different forms depending on a particular company’s needs — what makes the most sense based on the type of goods and services offered, or what provides most value for (and generates most demand from) new and existing customers.

Let’s take a look at the three main categories of recurring revenue models — and a few nuances of each — that companies can choose from to power growth.

Simple Subscription

The simple subscription model has become a common strategy across a wide range of industries in recent years. At its most basic, the simple subscription is a fixed recurring model, where customers pay a set amount of money upfront to use a company’s services (or receive goods) for a predetermined period of time — usually monthly, quarterly, or annually. You’ve likely seen this model in everything from newspaper delivery (or online access) to gym memberships to wine-of-the-month clubs.

While, as its name suggests, the simple subscription is a simple way to drive recurring revenue, it’s not quite as easy as sending every customer an identical invoice at the beginning of the quarter and then watching the money roll in. Successful billing for fixed subscriptions requires a surprising amount of flexibility to account for varying renewal times, trial periods, first-month discounts, grandfathered rates, and more — and the effortless automation capabilities to ensure unique customer communications happen on schedule and make invoicing, collecting, and reporting as simple as the model’s name implies.

With the right billing platform, setting up and maintaining simple subscriptions is a piece of cake, and for many businesses, this is the perfect billing model. And yet for others, it’s a bit limited. Hence our second category of recurring revenue models.

Usage-Based, Consumption-Based, and Pay-as-you-go Billing

Usage-based, consumption-based, and pay-as-you-go billing refers to any of a variety of ways companies can offer customers to pay for only what they need, when they need it. For consumers, these models lower the barrier to entry by allowing them to try various products and services on a low-commitment, low-risk basis. They also encourage ongoing loyalty by making it easy for users to see exactly what they’re paying for — and avoid paying for features they don’t need.

For businesses, usage-based billing offers unprecedented insights into customer behavior, highlighting exactly what they’re buying and how, from time-based spikes or lulls to popular service combinations to neglected products that are getting dusty on warehouse shelves. This takes significant guesswork out of the research and development process for new products and services, and it enables companies to create additional high-value bundles and packages to offer clients.

Additionally, usage-based billing removes the revenue ceiling from the simple subscription model. While those fixed payments are fantastic for predictability, they will remain stagnant from period to period. With usage-based models, however, there’s no limit to the growth companies and their customers can do together.

Read our recent blog post, “Unpacking Usage-Based Billing Models” to learn about the variety of forms usage-based pricing can take.

Hybrid Billing Models: The Best of Both Worlds

The final umbrella category of recurring revenue is the hybrid model, which marries the predictability of simple subscriptions with the limitless growth usage-based models make possible. Both models can be powerful on their own, but combined, they open the door to valuable opportunities for both companies and their clients, fully meeting both sides’ unique needs at every turn. Businesses can pair basic subscriptions — offering limited features at a lower, recurring price point — with one or more usage-based add-ons to test new offerings and encourage customers to purchase exactly what they need, whenever they’re ready to use it.

Today’s customer-driven market demands that companies wanting to stay ahead adopt new and innovative practices so they can become agile enough to meet growing consumer needs while making the most of often-razor-thin margins. And that includes flexible billing models — from simple subscriptions to a variety of usage-based models — that can be customized for every user. To learn how the Gotransverse billing platform can help your organization implement these models, enhancing both customer relationships and revenue potential, we invite you to take a virtual tour of the Gotransverse platform today. Then, when you’re ready, request a demo to speak directly with one of our experts.