The technology industry is transitioning away from traditional business models and toward flexible, consumption-based billing, especially in the software as a service (SaaS) industry. This move has benefits for businesses and customers alike.
For businesses, these billing models:
- reduce a customer’s barrier to entry by not requiring a large up-front fee
- deliver greater customer value by allowing customers to only pay for what they use
- help to lower operating costs
- provide deep insights into customer usage and buying behaviors.
Customers, meanwhile, can scale their service usage up or down based on their business needs and limit spending to their actual usage.
However, in order for a SaaS provider to successfully take advantage of this usage-based billing model and use its features to deliver for its customers, the provider should make sure it has the following five best practices in place.
1. Keep Your Pricing Model Simple
At its core, usage-based billing with SaaS services allows a customer to directly connect what they pay to what value they get from your services. In order to do so, customers need to be able to easily understand the services they are receiving and connect those services with the prices they are paying.
Make sure your pricing model is logical so your customers can pick the right plan for them. A complex pricing model can lead to frustrated customers, increased demands on customer service, and more churn.
2. Simplify Your Billing Processes
When you generate an invoice, you want the customer to pay as quickly as they are able to. For that to happen, your billing management system needs to be equipped to not only charge your customers when the payment is due but also present their specific usage levels in a simple, digestible format and initiate the necessary reminders to facilitate proper payment.
Your billing management solution should handle all of this work for you, providing processes and features out of the box that work to reduce any potential hurdles. This includes both dunning functionality and the ability for your customers to make a payment using an array of different payment methods, such as through prepayments, online, direct debit, and digital wallets. You might even consider giving customers the ability to adjust billing dates. Accommodating your customers’ payment preferences can help to bolster their positive experience with your platform.
3. Use Customer Demand to Upsell
Naturally, customer demand can fluctuate over the course of a year or even a season, based on different market forces or trends. No matter the period, however, make sure to use your customers’ usage data to refine your portfolio of product offerings and even your pricing model. Additionally, all of a customer’s usage data can be displayed in a customer dashboard that shows real-time usage volumes to help them keep track of just how much they use and rely on your services.
For example, use your customers’ usage statistics to provide personalized insights into the services that are delivering them the most value, and offer complimentary services, new consumption-based discounts, or additional training on other features they are not currently using that may benefit them. Additionally, this same data can help your sales and account management teams know which customers to spend more time and effort on to “upsell” and which customers are already satisfied with their services.
4. Leverage Usage Data to Anticipate Change
Your enterprise systems are collecting a lot of data about your customers and how they are using your services. You can use this data to better understand and track your customer trends and the impact your billing and pricing changes will have on them.
The right billing management system can help you forecast the impact your billing changes will have on customer product demands over time, project the impact of pricing changes, implement new processes (e.g., to prevent failed payments), visually present revenue projections, or even understand how different pricing incentive changes can impact customer demand. These are all powerful tools, and using them should be a regular part of monitoring your business.
5. Have Controls to Limit Revenue Leakage
Providing a service without getting paid for it is the antithesis of a usage-based billing model—or any business, for that matter.
Make sure your billing management tool has the ability to enforce proper payments and facilitate billing-related communications automatically before you have to get involved. Look for a billing management solution that has proper features that can:
- Remind customers of upcoming payments
- Highlight upcoming credit card expirations
- Perform Dunning services automatically
- Automatically invoice and facilitate payment collection
The features can push communications based on your and your customer’s preferences, such as through email or on a customer dashboard.
Bringing It All Together
In order for SaaS businesses to fully take advantage of a usage based billing model, they need to have the right billing management system in place. This system will not only automate key billing processes, but it will also enable companies to focus on growing their business. They will also be able to focus on enhancing the customer experience instead of struggling with manual processes and having to estimate how potential changes might impact revenue. The right billing management solution will also offer detailed customer and operating data to identify opportunities to improve customer engagement or make needed operational changes.
A service like Chargify can help you deliver precision for your customers and give you the agility to maintain your competitive advantage for years to come. If your organization is ready to take the next step, Chargify is ready to help you learn more and get the process started.