For B2B and B2C businesses alike, the way you package and price your offerings profoundly impacts customer buying behavior. And today, more than ever, consumers are looking for two things in the way they buy: flexibility and value. This behavior means offering pricing models tailored to customer preferences and enabling them to pay for only what they need.

To make these offerings feasible, we have to look at two elements:

• Usage: measuring how much of a product or service a customer consumes
• Rating: converting usage into dollars owed to invoice the customer

Usage Based Billing

What, exactly, does usage look like? Well, it depends on your model (or models), as usage can be measured in countless ways. We break down twelve different usage-based billing models for you in this recent blog post, but here are a few examples:

Time Basis

Under the time-based model, service rates may change depending on the date or time of day, so the customer will be charged based on the rate that was in effect when they purchased the service. For example, consider hotel rates or airfare that fluctuate based on demand, rising during peak seasons and decreasing at slower times. Carshare services also use time-based pricing, implementing rate spikes during rush hour and on busy weekend nights.

Stored Value

Businesses using stored value models allow customers to “preload” their accounts with a certain dollar amount, then draw from that amount as they use products or services until it dwindles down toward zero. The customer has an opportunity to "reload." Examples include public transit passes, gift certificates, prepaid phone cards, or the opportunity to pay upfront for several hours of services from a vendor.

Tiers & Tapers

Tiers and tapers are both volume-based pricing but with slightly different approaches.

Tiered pricing applies a volume discount to every unit purchased. So, if a customer buys ten items, they'll cost $100 apiece, but if she's buying 20, she'll pay the discounted price of $90 for each of the twenty items — not just items 11 through 20.

In tapered pricing models, pricing is determined by tiers (1-10, 11-20, 21-30, for example), and each tier has a different unit price. So, your first ten items may cost $100 each, but the next ten will cost $90, and the next ten will cost $85, etc. It's important to note that, in tapered pricing, the discount does not apply to every item purchased — only the items within each tier.

These are just a few of the many ways companies can set up usage-based pricing models—and, of course, different models can be combined into multidimensional billing strategies to maximize value for customers and revenue potential for your business.

Rating

However you decide to approach usage, monetizing those models requires a process called rating: taking all that usage data—which usually comes in various formats—finding and matching users to their current subscription and pricing plans, and calculating charges for an invoice.

If this sounds too complicated to manage manually, that's because it is. Sophisticated usage-based billing requires a system with a powerful usage and rating engine to convert data to dollars accurately, transparently, and in real-time.

It's a steep ask, but business can go with others. An agile billing partner can work with you to ensure everything is in place for a smooth transition, no matter how complex the models are or how rapid the growth is. How do you select the right billing partner? We recently broke down the four things leaders need to consider during the search, and we also outlined how to tell if a vendor truly supports usage-based billing.

At Gotransverse, we pride ourselves on helping our clients unlock the many advantages of usage-based billing. Our usage and rating system is designed to handle limitless volumes and complex rules. Our intelligent billing solution makes enabling dynamic pricing and adding new products and revenue streams easy. To learn more, take a virtual tour of our billing platform today. Then, when you’re ready, request a demo to find out whether Gotransverse is the right billing partner for your organization.

Gotransverse’s “Don’t Worry, Bill Happy” series is a “back to basics” look at foundational components of modern billing systems and processes and how the Gotransverse platform makes even the most complex billing needs easy.