Understanding Different Usage-Based Billing Models for SaaS

Technology

If you are running Software as a Service (SaaS), then customer acquisition through subscription management and scaling the business gets tricky. When providing software as a business, there are several clients that want different billing plans according to their requirements. There are different variables according to which models have been created that fit into the needs of merchants or business customers.

Read more : Software management

To understand plans for subscription management and recurring  systems, here is an overview of the term.  plans are charged differently based on the preset schedule and according to the needs of customers. If one does not suit a customer, optimizing plans are required for providing better customer service and streamlining all the processes without any hassle. Looking for a subscription plan that suits your needs, let’s get into the different types of subscription plans for your SaaS business.

What is Usage-Based Billing Model

The usage-based billing model here is also known as Pay-as-you-go or metered which operations on the consumption of customers. The Pay-as-you-go model is used by those businesses who do not fit into other types of business models or need only limited resources from the software. Furthermore, depending upon the consumption of data and charging only what your customers use is a great way of winning the hearts of customers as you show that their needs are taken care of. Different types of usage-based models can be explored as per the needs.

  • Tiered pricing
  • Per-unit pricing
  • Features-based pricing
  • Time-based consumption
  • Users-based tiered pricing
  • Multi-attribute pricing

To know more about the usage-based billing model, it has several benefits to offer. Some of them are listed below.

  • Product value gets directly linked with the price
  • Data usage can be tracked as the services are metered
  • On-demand product availability brings more customers
  • There is a chance to diversify the revenue stream
  • It is easy to opt for and flexible

Flat-Rate billing Model

The flat-rate billing model or flat fee billing model is one of the simplest subscription management billing models. This billing model is created for the entrepreneurs and businesses that operate on providing the features and levels of access to their customers in one package. Moreover, with this billing model, you will get an accuracy of recurring revenue along with a substantial increase in Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR).

If your business has a narrow product, or you are a small to mid-size business, then the flat fee model is perfect for you. Not only this, but this billing model saves startups from many complexities as this billing model is easy to access with its simplified solutions. With all the features and solutions available in a single package, it has many other benefits to offers. To list down the main advantages of the flat-rate model, here are a few:

  • Simplified Solutions
  • Consistent Revenue
  • Simplified Sales Forecast and Reconciliation
  • Cater to Customers Who Avoid Risks
  • Offer a Streamlined Approach to Business
  • Ability to Scale Packages

Hybrid Billing Model

The hybrid Billing Model is also one of the most used models across businesses that work on subscription payment or recurring payment systems. This model is the result obtained by combining other billing models to achieve the coupled effect. This also leads to obtaining several options and this is the main reason that many businesses have started to adopt this model for managing recurring payments. The hybrid model has several advantages and especially if your business wants to achieve a competitive edge in the market then you cannot overlook this plan. Also, if billing management gets complicated for you because of different models then a hybrid billing plan uncomplicates it for the customers and merchants. Implementing it provides an easy-to-follow plan for customers that further boosts customer satisfaction.

By implementing a hybrid billing model, here is what you get:

  • Combine recurrent charges with one-time charges or flat fee
  • Combine recurring charges with the charges for additional use of the product (usage-based billing)
  • Combine subscription charges with the charges for the overuse
  • Combine subscription charges with the charges for the package of other services
  • Combine one-time fee with the charges for trying some new service

 

There are multiple benefits of the hybrid model. Some of them are:

  • With time, you’ll have more freedom to adjust pricing.
  • New products can be promptly priced and launched.
  • Upselling and cross-selling can help businesses make more money.
  • You’ll have more control over how customers interact with you.
  • The number of customers retained and acquired will rise.
  • It is possible to create a pricing structure that better reflects product value.

Bottom-line

Choosing the right billing model for your business saves a lot of time and produces better results. Understanding your business models and opting for a business model that fits perfectly to your needs helps in achieving a competitive edge in the market and provides better customer service. To get the best model for your business, schedule a demo now to manage all the subscription payments.

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