Billing is one of the important sides of every business. Different businesses opt for a billing model that suits their needs. The sole target of having an apt billing model is to streamline the business revenue. The basis of every billing system is that the customer does not want to pay more than a certain amount and the business owner needs his timely payments. If you want to take your SaaS business to the next level, it is mandatory to have the best billing model. Here are some of the billing systems that many SaaS companies opt for:
- Freemium billing model
- Feature-based billing system
- Tiered pricing strategy
- Flat rate pricing
- Usage-based pricing model
Presently, many SaaS companies prefer the usage-based billing model. However, it is not compulsory that this model suits all SaaS businesses. Here are some important aspects that one needs to ponder before selecting this model.
Unsuitable for All Business
In China, people still remember Yan Zi from their history. He tried to grow sweet oranges of the South in North. The oranges grew but were bitter and sour. Likewise, one billing model cannot fit all scenarios and all businesses. Think before using usage-based pricing. Some of the SaaS business types that can benefit from usage-based billing software include:
- Online media platforms where videos are available. The user can be charged based on the data that he uses.
- Cloud storage applications can charge a price depending upon the storage space used by their client.
- Companies offering web services. For example, Amazon Web Services.
- API platforms for messages, emails, and voice calls etc.
If your business is related to subscribing to the physical items then do not choose metered billing systems.
Price for Usage-Based Services
When you provide SaaS and follow a usage-based billing model, you have to be cautious to define the charges for your services. Sometimes, customer usage decreases so does your earning from that specific customer. It becomes difficult to predict revenue in such cases. You can lower service charges to retain the customer but it has limitations. So, think twice if the user-based model suits your SaaS business?
Duplicate Data Entries
When things are unplanned, the outcomes are unpredictable for you. Many companies have already existing usage monitoring modules integrated with their software. They get metered billing systems and run them separately. Resultantly, there come duplicate data entries from both systems.
If you have decided to choose metered billing software then try to optimize it so as to earn more revenue. Following are some suggestions to make your usage-based billing model work:
Make Smooth Transition
People who were using subscription billing systems or flat rates as their billing systems and now have planned to shift to metered billing should plan it beforehand. You have to track the amount of data accessed, moved, and stored by your customers. Some SaaS companies charge for the number of times data accessed and some charge for the number of people who access the data.
Try a Blend of Pricing Models
As it has been discussed earlier that you cannot shift to SaaS usage-based pricing blindly. The billing system highly depends on your business needs and requirements. Therefore, some businesses try a mix of one or more billing models. For example, they offer fixed flat prices to some of their customers but offer metered billing options to others. See, it depends on the nature of the software services that you offer and the customer as well. Sometimes, the customer does not find it feasible to pay a fixed price. Such customers think that they use your services comparatively less but are being charged more. Here, a pricing model based on the usage of the customer helps in customer retention.
Monitor Customer Usage
One of the major benefits of usage-based charges of the customer is that you have in-depth access to the usage of the customer. When you introduce some new features, you will be able to monitor the usage of these features by the customer and improve your system accordingly. You can respond to the customer based on his interests timely.
If you have learned the tactics to use metered billing, you will surely get a competitive advantage in the market. This automated billing system will make your billing process accurate and efficient. It will become easier for you to track the data of every customer. However, you must think before you leap. If you face loss or anomaly regarding your pricing model if you believe that pricing based on usage will benefit you, only then shift to the usage-based model.