Modern day billing is rooted in the solutions established by telecom — Billing 1.0. These highly robust and sophisticated systems were built over many years at a huge cost, making them accessible to only very large enterprises. Billing 1.0 was valuable in establishing predictable revenue and continual contact with customers.
Billing 2.0 arrived with the emergence of cloud based services and models, shifting billing resources to the cloud, which made solutions easier to deploy and highly cost effective for most businesses. These solutions were perfect for simple recurring payments and subscription management. However, Billing 2.0 lacks the sophistication to handle complex billing situations and cannot accommodate activities.
Enter Billing 3.0, which blends the best of the previous models: the ability to solve complex challenges, yet cloud based for affordability and continual improvement. Billing 3.0 allows for the creation of combinations of services, pricing, and payment options around the dynamics of customers, making activity-based billing a reality. With Billing 3.0, every customer interaction and activity becomes an opportunity for monetization.
Subscriptions allow for business to sell periodic (monthly, yearly, etc.) access to products or services. This business model can help to create recurring revenue and brand loyalty. Subscriptions can be a solid, lasting business model for many industries.
But subscription value — to both customers and businesses — can diminish over time due to marketing pressures, commoditization, or changing preferences. If profitability, flexibility and sustainability are important to your business, then billing absolutely has to go beyond delivering an invoice or renewing a subscription.
Customers engage with you in many different ways: Chats, texts, downloads, uploads, views, emails, calls, orders, returns, logins, profile changes, and more. Activity-based billing creates a process for measuring, aggregating, analyzing, rating, charging, invoicing, payment processing and reporting on those customer engagements.
This differs from a simple subscription model as activities are essentially anything you can measure and sell. To measure and monetize customer activities, businesses have to break those actions into measurable components that can be rated, metered and charged. The more activities that engage your customer and the better the incentives for increased consumption, the more likely they are to remain loyal.
In the real world, billing is an intricate process, spanning multiple departments and systems. There are multiple pre-billing processes and complex functions such as Event Handling and Rating that have to take place. In some cases, you have to know up-to-the-second what a customer has purchased and what services have been consumed in order to maintain customer satisfaction or up-sell services. Additionally, charges must accurately reflect not only what a customer initially asked for, but also the incremental add-ons purchased along the way. Or, conversely, the credits and discounts needed to mitigate the effects of poor service quality. You then have to ensure payment according to varying customer preferences and rules. And make sure your customers understand how/why they are being billed. That’s billing.
While most businesses view billing as an essential function, the billing systems themselves may prohibit it from becoming a strategic asset. In fact, for many companies, billing began with Excel spreadsheets and, as sales grew, became a time consuming and laborious headache. Businesses continue to use these manual processes today. Others have adopted costly systems that process bills but don’t do much more. Both options are error prone, lack a view into real-time data, and are difficult to correct.
All companies can benefit by shifting the perception of billing. Instead of thinking about billing as monthly invoices and payments, consider how billing could be a differentiator. Billing can help your business anticipate, recognize, and respond to changing dynamics and customer preferences. Billing can help your reduce customer churn. Billing can help you quickly introduce new packages and capture new revenue streams.
With a sophisticated, strategic billing system, businesses can improve service velocity, increase customer touch points and monetize customer activities in ways that increase revenue and deepen customer loyalty.