Meta Description: Find out if your business can support Stripe Usage-Based Billing and whether it’s the most profitable decision for your company to take.
Businesses of almost all niches are always on the lookout for lucrative opportunities. And when it comes to finding ways to increase revenue, what’s better than to reconsider your billing model itself? There are many companies around the world of all industries and sizes that have realized this. Your pricing strategy might be the biggest obstacle your business is facing and no amount of marketing can solve this.
In fact, businesses that have diverged from traditional pricing conventions such as the likes of Porsche have revolutionized their industries. It’s no secret that all automotive giants are going to hop on the subscription bandwagon. And there’s no shame in admitting that though it’s nowhere near the value a company like Porsche could make for one of their products, it’s certainly steadier and appealing to vast audiences.
Inevitably, changing your billing model can have significant impacts on your business operations as well as your marketing strategy. As Porsche has witnessed, your target audience can change dramatically if you introduce a subscription billing model such as usage-based billing.
Usage Based Billing Types
There are several types of usage-based billing models. Though the name seems simple enough, the complexities of setting up a pricing strategy require careful study. With sufficient understanding of what distinguishes these billing models from one another, one can narrow down plausible choices for a business.
Pay As You Go
The pay as you go model describes a pricing strategy that charges customers by their consumption volume. Depending upon the type of service/product, if there’s a quantifiable approach to measure the value metric, you can charge customers as their consumption increases.
This is most commonly seen in cloud storage providers who charge customers based on the volume of storage they use. Similarly, cloud computing services also charge users depending upon the equipment and volume of the data they’re using.
Per-Unit
Some businesses have easily measurable and quantifiable products or services such as providing leads, calls, etc. Like all Stripe usage-based billing models, this is very common among SaaS companies. Quantifiable value metrics are easy to use for pricing strategies. For example, businesses can charge $5 for every lead they provide.
Per-User
Some SaaS companies don’t have a quantifiable service such as Grammarly. While Grammarly is free, it offers a paid subscription with premium features that are restricted to one user only. That means if you have a team, you need to pay for every user that is going to require a separate account.
Overage
Overage pricing is best understood with examples of mobile data providers that charge based on volume consumptions. The idea behind overage pricing is to discourage usage above certain limitations. An example is of utility bills that charge you more per-unit as you cross the limit set by the supplier.
Tier-Based Pricing
Tier-based pricing is used commonly with Stripe usage-based billing models. After your consumer/user reaches a certain limit, they are charged lower for the amount they use after this limit. For example, if you were charged $10 for the first 5GBs you consumed, you’ll have to pay $5 for every 5GBs you consume after the initial 5GB.
Figure Out Your Value Metric
From the name, we can all guess what this billing model entails. However, it’d be wrong to assume that all businesses of all niches can rely on this model to work. The struggle is real, especially for industries where the norm hasn’t been challenged in decades.
There is no set formula that can help you figure out whether your business will work with such a billing model. The only way to know for sure is to try it out after figuring out the value metric for your business.
The value metric is a graph that shows the relation between the cost you accrue for providing the service/product and the amount that your customers are willing to spend on it. Of course, this requires quite a bit of market research. And as explained above, what appears to be the norm shouldn’t be taken as something written in stone.
Subscription Management Software
Before you implement a recurring billing model, you need a payment processing or subscription management software.
This will be essential in order to streamline your accounting and finance operations. You can’t expect your accountants to spend time creating and processing every invoice and engaging with clients to reconcile payments.
Moreover, in order to go for concepts like Stripe usage-based billing, you will need to make sure that you’re offering sufficient payment gateway integrations. This is also something that is done via subscription management software. Incorporating one in your tech stack will allow you to bring all your operational processes in one easy-to-use window.
Integrating Multiple Payment Gateways
As you open your audience to multiple regions and widen your marketing range, you’ll have to integrate multiple payment gateways.
That’s because you don’t want to miss out on incoming revenue opportunities. With subscription-based businesses, the idea is to get more customers on board every day.
And if you’re restricting your audiences with a certain number of payment options, you’re refusing the chance to maximize revenue generation. This is why you should integrate PayPal, Authorize.Net, Adyen, Braintree, and Stripe usage-based billing into your business.
Meta Description: Find out if your business can support Stripe Usage-Based Billing and whether it’s the most profitable decision for your company to take.
How Can a Business Go for Usage Based Billing?
Businesses of almost all niches are always on the lookout for lucrative opportunities. And when it comes to finding ways to increase revenue, what’s better than to reconsider your billing model itself? There are many companies around the world of all industries and sizes that have realized this. Your pricing strategy might be the biggest obstacle your business is facing and no amount of marketing can solve this.
In fact, businesses that have diverged from traditional pricing conventions such as the likes of Porsche have revolutionized their industries. It’s no secret that all automotive giants are going to hop on the subscription bandwagon. And there’s no shame in admitting that though it’s nowhere near the value a company like Porsche could make for one of their products, it’s certainly steadier and appealing to vast audiences.
Inevitably, changing your billing model can have significant impacts on your business operations as well as your marketing strategy. As Porsche has witnessed, your target audience can change dramatically if you introduce a subscription billing model such as usage-based billing.
Usage Based Billing Types
There are several types of usage-based billing models. Though the name seems simple enough, the complexities of setting up a pricing strategy require careful study. With sufficient understanding of what distinguishes these billing models from one another, one can narrow down plausible choices for a business.
Pay As You Go
The pay as you go model describes a pricing strategy that charges customers by their consumption volume. Depending upon the type of service/product, if there’s a quantifiable approach to measure the value metric, you can charge customers as their consumption increases.
This is most commonly seen in cloud storage providers who charge customers based on the volume of storage they use. Similarly, cloud computing services also charge users depending upon the equipment and volume of the data they’re using.
Per-Unit
Some businesses have easily measurable and quantifiable products or services such as providing leads, calls, etc. Like all Stripe usage-based billing models, this is very common among SaaS companies. Quantifiable value metrics are easy to use for pricing strategies. For example, businesses can charge $5 for every lead they provide.
Per-User
Some SaaS companies don’t have a quantifiable service such as Grammarly. While Grammarly is free, it offers a paid subscription with premium features that are restricted to one user only. That means if you have a team, you need to pay for every user that is going to require a separate account.
Overage
Overage pricing is best understood with examples of mobile data providers that charge based on volume consumptions. The idea behind overage pricing is to discourage usage above certain limitations. An example is of utility bills that charge you more per-unit as you cross the limit set by the supplier.
Tier-Based Pricing
Tier-based pricing is used commonly with Stripe usage-based billing models. After your consumer/user reaches a certain limit, they are charged lower for the amount they use after this limit. For example, if you were charged $10 for the first 5GBs you consumed, you’ll have to pay $5 for every 5GBs you consume after the initial 5GB.
Figure Out Your Value Metric
From the name, we can all guess what this billing model entails. However, it’d be wrong to assume that all businesses of all niches can rely on this model to work. The struggle is real, especially for industries where the norm hasn’t been challenged in decades.
There is no set formula that can help you figure out whether your business will work with such a billing model. The only way to know for sure is to try it out after figuring out the value metric for your business.
The value metric is a graph that shows the relation between the cost you accrue for providing the service/product and the amount that your customers are willing to spend on it. Of course, this requires quite a bit of market research. And as explained above, what appears to be the norm shouldn’t be taken as something written in stone.
Subscription Management Software
Before you implement a recurring billing model, you need a payment processing or subscription management software.
This will be essential in order to streamline your accounting and finance operations. You can’t expect your accountants to spend time creating and processing every invoice and engaging with clients to reconcile payments.
Moreover, in order to go for concepts like Stripe usage-based billing, you will need to make sure that you’re offering sufficient payment gateway integrations. This is also something that is done via subscription management software. Incorporating one in your tech stack will allow you to bring all your operational processes in one easy-to-use window.
Integrating Multiple Payment Gateways
As you open your audience to multiple regions and widen your marketing range, you’ll have to integrate multiple payment gateways.
That’s because you don’t want to miss out on incoming revenue opportunities. With subscription-based businesses, the idea is to get more customers on board every day.
And if you’re restricting your audiences with a certain number of payment options, you’re refusing the chance to maximize revenue generation. This is why you should integrate PayPal, Authorize.Net, Adyen, Braintree, and Stripe usage-based billing into your business.
