Billing a customer based on how much they use might sound simple, but there are many complexities to usage-based pricing. Before adopting a rating engine and billing system, many service providers rely on pulling data from monitored systems into spreadsheets, reformat the data, and then load the customer usage data into a recurring billing system once (or sometimes more) per billing cycle. This manual and tedious approach to creating end-customer invoices may work for low volume businesses, but as you scale your business, the billing process can slow you down exponentially.
Before we consider usage and rating, let’s cover the basics:
Usage is the ability to bill a customer for what they have used over a given period. Customers pay for what they use based on the service usage which could take the form of commission, discounts, licenses, messages sent, GB, MB, bandwidth, etc.
Rating is the charge or price for a particular event.
Rating usage is a process of converting the quantity of service during a period of time into monetary value for a customer. For example, the price of a 10 minutes call is $4 at the rate of $0.40 per minute. Usage metering framework tracks the use of any unit type and calculates the charges for the end-customer’s invoice.
When it comes to rating usage and usage-based pricing, there are several business impacts to consider before going “all-in.”
Here are a few things to consider when it comes to SaaS usage based pricing:
When the threshold for usage is crossed, overage charges or payments can apply mid-billing cycle. In order to accurately bill customers, use a flexible billing system that automates processes for calculating bills and generating invoices.
There are five stages of the usage lifecycle:
At Rev.io, our telecom billing platform will help you monetize and grow your billing business by managing offers, financial processes and customer accounts. For more information on usage and rating, please read our ATL Communications Automates Consumption-Based Billing post where we discuss a case study. If you want to know how to leverage our new REST API, please read our REST API Integration for Usage-Based Billing post. Reach out to us using the contact Rev.io form and let us help you grow your subscription business.