Enhancing Subscription Models with Consumption-Based Billing

Bloomberg Digital’s recent announcement that it would be putting its news service and TV channel behind a $35/month paywall was the last straw for TechCrunch’s Danny Chrichton, who wrote an article unpacking what he calls the “subscription hell” that has taken over the digital media landscape.

While Chrichton, like many of us, is all in favor of subscription models as a reliable source of revenue (and a way for media outlets to get out from under the thumb of advertising), he says “everyone seems to be doing them wrong.”

“I’m frustrated that the web’s promise of instant and free access to the world’s information appears to be dying. I’m frustrated that subscription usually means just putting formerly free content behind a paywall. […] And I’m frustrated that subscription pricing rarely seems to account for other subscriptions I have, even when content libraries are similar.”

And it’s true. Subscription fatigue is a real concern — and not just in media — as $10 dollars per month here and $150 a year there start to add up without providing enough real, unique value, draining customers’ wallets and their patience.

Chrichton’s main gripe?

“Subscriptions are always positioned as all-or-nothing, with limited metering or tiering, to try to force the conversion. To my mind though, the question is not how to get 1% of readers to pay an exorbitant price, but how to get say 20% of your readers to pay you a cheaper price. It’s not about exclusion, but about participation.”

This idea reflects the questions the SaaS companies we work with ask when they’re looking to enhance their subscription models. How can we ensure users feel like they’re getting the value they pay for?

The Key to Avoiding “Subscription Hell” Is Consumption-Based Billing

Consumption-based billing, a hybrid of the standard subscription and one-time charge models, is a flexible approach that couples subscription services with additional, pay-as-you-go offerings. Under this model, companies benefit from the predictable revenue streams subscriptions provide, but they also offer add-ons that give customers the flexibility and transparency they need to be confident in the value of their purchase. What’s more, these add-ons give businesses the opportunity to track exactly how much customers are using their products and services in order to understand what people are willing to pay for and stay on top of the market.

Learn more about consumption-based billing.

Cell phone companies have been using this model for years, charging a base subscription rate and allowing customers to purchase extra data, messaging or minutes. In Bloomberg’s case, it could mean charging a lower subscription rate and allowing customers to purchase access to video resources or premium content in bundles of five to ten at a time. By lowering the subscription rate and offering add-on purchases, Bloomberg can lower the barrier of entry and increase its pool of loyal customers, and it can strengthen its understanding of what kind of content consumers are willing to pay for in order to make that subscription even more attractive in the future.

More and more high-tech businesses are moving to a consumption-based billing system today, and according to Gartner, it’s the billing model of the future. For more information about how Gotransverse can help your organization avoid “subscription hell” and gain a competitive advantage by making the shift to consumption-based billing, contact us at info@gotransverse.com today.

Allison Dancy is the Vice President of Marketing at Gotransverse. A proven marketing leader with over 20 years experience across multiple industries, Allison is responsible for the strategic direction and execution of all aspects of marketing.