Posts Tagged ‘Subscription Billing’

The Appeal of Usage-based Billing

May 30, 2018

One of the strongest drivers of customer satisfaction is a customer’s perception of value for money.  Value for money is judged by how much a customer pays in return for what value they receive as a product or service.

Environmental and Ambient Data

Applying this logic to service billing models, we can deduce the following patterns;

Fixed Recurring Charges

With fixed recurring charges, the customer will perceive good value for money when their service usage is high in relation to the fixed service charge, but will perceive bad value for money when their service usage is low in relation to the fixed service charge.

In this model, the service supplier wins if service usage is low and the customer’s value for money perception is low, the service supplier loses if the service usage is high.

It can also be said that the supplier wins when the customer loses and the supplier loses when the customer wins.

The pricing of fixed recurring charges tends to be limited by what the customers with low service usage will be prepared to pay, within their perception of value for money.

Usage-Based Charges

With usage-based charges, customers should perceive a consistent level of value for money, regardless of the amount of service usage.  The overall cost of the service will be proportional to the level of service usage. In theory, the value for money perception should be similar regardless of whether customers are high or low service users.

The pricing of usage-based services should therefore not be restricted by a value perception of a subset of customers, but rather the value perception of all customers.

With a usage-based charging model, the supplier and customer can both win at the same time.

Overall Revenue can be Higher for Usage-based Billing

My experience through working with Datagate’s clients, is that when a service supplier replaces a fixed price model with a usage-based pricing model, they can generally increase their overall revenue significantly.

This was demonstrated most recently in a case study for Texas-based Ranch Hill Water Supply Corporation, who achieved a 26% revenue increase after implementing a usage-based charging model, using Kamstrup measurement systems, Datagate billing and Xero accounting software.

 

Success with Usage-based Billing

April 3, 2018

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With the rapid growth of the “as-a-service” business model and the abundance of new services enabled by the Internet and mobile apps, it’s fair to say that there has been a major mindset shift in the monetization of new businesses towards subscription and usage-based billing.

It’s easy to forget that other, more mature businesses categories, such as telecommunications, water, gas, electricity, news media and others, have been using subscription and usage-based billing for decades and have built up a substantial amount of experience, knowledge and I.P. in the subject – not to mention substantial recurring revenue streams!

My business, Datagate Innovation has learnt a lot from the telecommunications industry in particular, where it’s common practice to bill fixed monthly charges for fixed connections, usage charges for calls, texts and data, whilst also offering bundles of usage of various services for a fixed charge. We think this I.P. is invaluable, not only in billing for telecommunications and utility re-sellers, but also for the new and emerging business categories, such as Internet-of-Things, Software-as-a-Service and Artificial Intelligence, among others,

Datagate Innovation’s purpose in life is to help re-sellers maximize and grow their recurring revenue with fixed and usage-based billing, whilst minimize their billing costs through the use of our Cloud-based Datagate rating and billing platform.

The majority of Datagate’s clients are Managed Service Providers (MSPs) who re-sell telecommunications services and IT services to their business customers, but we are starting to get traction in other industry categories, such as electricity and water, who also work on a usage-billing basis.

This month Datagate published a case study for Ranch Hills Water Supply Corporation (RHWSC), who are based in Texas and are using Datagate to bill their water customers on a usage basis.  By shifting their billing to Datagate and a usage-basis, they increased revenue by around 26%, while cutting their billing time by around two thirds. Datagate was configured to receive water usage data from RHWC’s Kamstrup Ready Manager system and post the resulting bills to RHWSC’s Xero accounting system, after emailing them directly to the end customers.

The big opportunity we see for all service resellers today is the convergence of different types of usage-based services that can all be sold through a single reseller.  We are already seeing our clients combine IT and telephony, as well as telephony and electricity.  As long as it’s usage-based and we can get access to the usage data, then Datagate can bill it, on a single invoice.