Consumption-Based Models: Unpacking Stored Value

Here at Gotransverse, we’re big believers in enhancing simple subscriptions by combining them with consumption-based models. This strategy helps companies achieve three major goals: driving adoption, maximizing revenue, and improving cash flow. For more on how that works, we invite you to read our recent blog post with insights from Gotransverse President, Mike Beamer. But consumption-based billing takes on many forms, with models ranging from tiers and tapers to time-based value to resource sharing and many other variations and combinations in between.

For now, let’s take a deep dive into just one of those models: stored value.

What Is Stored Value?

A stored value model (also known as prepaid) gives customers the ability to pay a specific amount in advance and then draw down from that value as they purchase products or consume services. They can reload value (or “top up”) manually at any time, or they can authorize automatic top-ups so that when the balance falls below a certain amount, the payment method is automatically charged to bring it back up to the original amount.

If you have a toll tag, you’ve seen stored value in action in your own life. You start with a balance—let’s say $100—and every time you use the toll road, the sensors on the road detect your tag and deduct the appropriate fee from your toll account. When the balance falls below a certain amount, maybe $10, your credit card is charged and your card is reloaded to $100.

Or, for the caffeine fiends out there (us, for starters!), your Starbucks card is another great example. You load a certain amount of money into your account, and then all you have to do to pay for your next few lattes is scan your app. The price of the coffee is deducted each time. When you run low, you can choose to refill the account manually or, if you like to live dangerously, you can set an auto reload to add $10, $20, or $50 every time you hit zero.

What Are the Benefits of Stored Value?

For customers, the first benefit of stored value is convenience. Especially if they’ve authorized automatic top-ups, they can “set it and forget it,” using products or services as they need them, paying for only what they use and not having to worry about individual payments.

For businesses, the very convenience customers enjoy drives long-term loyalty and an opportunity to boost revenue through cross-selling, upselling, and simply incentivizing customers to keep making purchases. Again, Starbucks has this model down, as they send out weekly promotions, challenges and more to their cardholders encouraging them to keep purchasing their favorite beverages — and try new ones, as well — on those stored-value accounts in order to earn rewards. And, hey, if the money’s already there, why not go ahead and buy that coffee?

It also reduces risk from the equation. For customers, they know the charge up front before they start using the product or service. For companies, they get cash sooner. All businesses want that right?

How Can My Business Implement a Stored Value Billing Model?

Like most consumption-based billing models, stored value requires a powerful rating engine to convert customer usage data into monetary value, tracking spend, reloading as necessary (or notifying customers it’s time to reload), and recording revenue appropriately.

Unlike simple subscription models, stored value and other consumption-based models aren’t one size fits all. In stored value, you’ll be juggling varying prepayment amounts and rates of consumption, for starters. And as you add additional consumption-based offerings, mediation, and rating needs will only become more complex, likely overburdening your legacy or DIY billing platform. In all likelihood, shifting to consumption-based billing models will also require shifting to an intelligent billing platform that can automate any number of models, enhancing the customer experience, optimizing workflows, and powering growth.

Adding stored value and other consumption-based billing models to a simple subscription can give businesses a powerful leg up in both customer loyalty and revenue potential. When your organization is ready to step up its billing, we’d love to talk. To learn more, take a tour of the Gotransverse platform or call us to schedule your complimentary, personalized demo.