Here at goTransverse, we talk frequently about the benefits of modernized and consumption-based billing, from the improved flexibility and user experience to the enhanced revenue tracking and reporting abilities.
But what, exactly, do these billing models look like? The beauty of intelligent billing is that it enables more than one answer to that question. Through real-time rating — juggling customer-specific rules for billing based on different usage models — these platforms allow businesses to package and price their goods and services in a wide variety of ways, from simple flat fees to much more complicated models.
Let’s take a look at just a few examples of the pricing models intelligent billing makes possible.
7 Consumption-Based Pricing Model Examples
- Time Based: Businesses with flexible pricing — like hotels that charge more for rooms during peak seasons or ride share services that add surcharges during rush hour — use time-based models to charge users the rate that was in effect at the time they used the service.
- Stored Value: Like your metro card or your toll tag, a stored-value model is a pay-as-you-go method that allows businesses to preassign a value to a customer’s account and draw from that value as services or products are consumed.
- Sharing: When there are multiple users on an account, sharing models allocate charges to each user based on individual consumption.
- Multidimensional: These models consider multiple attributes of an event to calculate an end charge. Next time you look at a Lyft receipt, note that both time and mileage went into computing your fare. That’s a simple example of a multidimensional model.
- Tiered: If you’ve ever taken advantage of a bulk discount, you’ve seen tiered pricing at work. Under this model, the price for a product or service flexes based on the quantity consumed. If a user purchases twenty units, for example, he may pay $100 apiece for the first set of ten and only $95 apiece for the second set.
- Tapered: Like the tiered model, tapered billing applies a bulk discount. But while tiered pricing only applies the discount to the units in each tier, tapered pricing applies to the total quantity purchased. So looking at the example above under the tapered model, if the user purchases ten units, he pays $100 for each. But if he purchases twenty, he gets all of them for $95 a piece.
- Allowance: Like a retainer or a data plan on a phone bill, under this model customers pay a subscription fee for a predetermined amount and are charged the same fee whether they use their allotment or not. Companies can choose to add overage charges or rollovers to these allowances, or they can prorate the fee for partial usage periods.
Of course, these pricing model examples aren’t an exhaustive list, and there are countless ways to combine and customize the different models to fit your business’ needs.
Learn more in our Executive Guide to Intelligent Billing, and contact us at firstname.lastname@example.org for more information about how we can help your organization improve customer relationships and increase revenue through intelligent billing.
Michael Beamer is a 24-year technology and business leader with unique experience helping companies maximize the business impact of technology. In his current role as president of goTransverse, he is dedicated to providing clients a flexible billing touch-point that creates long-lasting customer relationships and increasing customer lifetime value.