When a business has decided to implement consumption - or usage-based billing models and is on the hunt for a vendor to partner with them in the effort - one of the most important questions is which types of usage-based models they support. After all, variety makes these models so powerful for businesses looking for customizable ways to meet customers’ unique and changing needs. Still, not all "usage-based" systems are equipped to handle the full breadth of these models.

Through real-time rating engines, billing platforms that truly power consumption-based billing can juggle customer-specific rules for billing based on different usage models, from flat fees to much more complicated scenarios.

To paint a picture of the power behind these engines, here’s a primer on some of the common usage and rating models supported by the Gotransverse platform.

1. Allowances

The allowance model works like a retainer you might pay an attorney or other service provider. The customer pays a subscription fee that covers a predetermined consumption amount (an allowance), and that fee is the same whether the customer uses the full allowance or not. With the right billing solution, these allowances can be customized in a few different ways based on the needs of the customers and the requirements of different product and service lines:

  • Proration: Allowances can be prorated or adjusted to account for customers who sign up in the middle of a billing period
  • Overages: When customers go beyond the billing period's allowance, they can be charged additional fees per usage event.
  • Rollover: When customers use less than their allotment, the remainder can be rolled over to the next billing period, just like old-school cell phone minutes.

2. Tiers

Tiered models include stair-stepped pricing based on the amount of consumption. You might think of these as similar to bulk discounts. You pay more per unit at the lowest tiers—the smallest number of units. But the more units you use, the less you pay for each. For example, you might use 20 units for $10 a piece, but if you use 40 units, the price drops to $7 apiece.

3. Tapers

Tapers are similar to tiers because the price decreases as the quantity increases. However, while tiered pricing applies to every unit purchased, tapered pricing only applies to the quantities within each level. So, taking the same quantities from the example before, the model looks a little different. You still use your first 20 units for $10 apiece, but if you use 40 units, you pay $10 a piece for the first 20 and then only $7 a piece for units 21 through 40.

4. Multidimensional

Multidimensional models calculate the price based on complex formulas that consider multiple conditions or attributes. For an example, look at your most recent Lyft or Uber receipt. The cost factors in both time and miles, and it likely includes surcharges based on demand and a flat fee or two. (You can see how these calculations could start confusing without a billing platform specifically designed to handle them!)

5. Sharing

Sharing models come in two different forms:

  • Usage allocation pools give everyone access to the same usage allowance but then, at the end of the billing period, reallocate charges to each user based on the share of the pool they consumed.
  • Resource sharing looks more like a family plan; meaning every user draws from the same allowance, and no matter what the balance looks like among users (e.g., how many more gigs of data your little sister used than you did), nobody is charged overages unless the total consumption exceeds the cap.

6. Time-Based

For services with fluctuating rates (like hotel rooms or plane tickets, which change based on season, demand, and, sometimes seems, whim) a rating engine can ensure each event is charged the rate that corresponds with the time the service was consumed or purchased.

7. Pass-Through

A pass-through rating allows businesses to take in a pre-rated event and apply it to customers' allowances without changing the charge of the event. So if a portion of your pricing comes into your billing system already rated, you don't need to waste time sending it through the rating engine again. Or if you want to add an upcharge to a pre-rated event, you can easily do that too.

8. Stored Value

A stored-value model works like a subway pass or a Starbucks card. Customers pay upfront to "load" their accounts, drawing down from the value as they consume services and products—like rides on the red line or pumpkin spice lattes. Once they're out of value, either the customer will receive a notice and reload the account manually, or an automatic charge will reset the balance.

9. Threshold Notification

While the Gotransverse platform’s near-real-time rating engine means customers can check in on their usage anytime throughout the period, threshold notifications allow businesses to be a little more proactive about communicating status with their users. Threshold notifications are often used in conjunction with other billing models, such as allowance or stored value billing. (They could also be used with pools to help customers track each user's use or with tiers and tapers to follow how close a customer is to the next pricing level.) These preset alerts—emails, text messages, or API calls—are designed to let users know when they’ve reached or exceeded a certain percentage of their consumption allowance or stored value. Just like those text messages you get when you are 75% of the way through your data plan.

Any Combination of the Above

Finally, while any of these models can be used independently, they can also be combined in any way that makes sense for businesses and their customers. Simple subscriptions can be paired with any of these models to enable "add-ons," and companies can pair up two or more usage models—such as layering pooling onto stored value or applying tiers or tapers to pay-as-you-go models. In this way, businesses can genuinely customize billing in the way that best provides value to customers and builds the bottom line.

Automating Usage and Rating to Optimize Billing

With various complicated models in play, it’s easy to see how manual usage and rating efforts—or even efforts to reconfigure legacy systems to automate these processes—could lead to delays, errors, revenue leakage, and unhappy customers. Fortunately, sophisticated billing platforms like Gotransverse are designed specifically to handle high client volume and complex, variable billing models. The near-real-time rating engine can process large volumes of data efficiently so you have a real-time glimpse into pending charges for your customers, and the automated workflow capabilities ensure the billing process is smooth, efficient, and accurate for both the company and its customers.

Suppose your organization is ready to shift to a more powerful billing system that handles limitless monetization models with ease to enhance flexibility, ensure accuracy, and improve customer loyalty. In that case, we invite you to take a virtual tour of the Gotransverse platform today. Then, when you’re ready, schedule a complimentary demo, and one of our experts will gladly walk you through our platform and processes.