Pay-as-you-go model: 3 business sectors that already benefit

How can we explain the rise of consumer billing in B2B?

The development of the usership economy is the result of a combination of several factors:

• customers’ desire to pay the right price;
• customers’ desire for greater transparency and personalisation;
• an inflationary economic context implying the need to rationalise expenditure as much as possible;
• the need for companies to stand out from the competition;
• the ever-increasing importance of user experience and customer satisfaction in the loyalty process.

At the crossroads of all these paths lies pay-per-use billing.

Providing pay-as-you-go billing helps to generate additional profits. Combined with a traditional subscription system, billing on a pay-as-you-go basis makes it possible to extend the range of existing services.

A company can also choose to provide only pay-per-use services. This so-called customised formula based on a combination of services is highly appreciated for its flexibility.

Basically, it may be seen as a win-win situation between the company and the consumer. The usership economy is less engaging than a traditional subscription model, but paradoxically helps to increase customer loyalty. Greater freedom, the key to customer retention ?

Usage-based billing: how does it work?

Concretely, pay-per-use billing is based on several mechanisms:

• the definition of metrics (number of users, data consumed, etc.) and the type of pricing (per unit, per volume, etc.);
• the real-time monitoring and gathering of consumed data;
• the collected data analysis (to better refine future commercial proposals, to warn a user when he reaches a significant consumption threshold, etc.);
• the transmission of a clear and detailed invoice (the client’s ability to anticipate and adjust will be improved).

In order to be fully aware of how beneficial the usage economy is, the easiest way is to project yourself through concrete cases:

Energy, professional services and industry already have a strategic focus on pay-as-you-go billing.

Pay-as-you-go model and energy: a natural link

When it comes to the pay-as-you-go model , the energy sector is an obvious example. In fact, we’re already confronted with it in our personal lives (gas, water, etc.). In B2B, pay-per-use is also meaningful when it comes to energy.

Let’s take the example of an electricity contract to supply a company’s premises. Here, there are two choices:

• estimated consumption billing (fixed monthly payment based on the assumed equipment use, the evolution of electricity prices, etc.);
• invoicing on actual consumption (monthly payment depending on the actual equipment use).

The first model, while having some advantages, remains extremely rigid. This is especially true at a time when customers are demanding more transparency and customisation from companies. As a player in the energy sector, offering pay-as-you-go billing has many advantages:

• providing a suitable offer regarding the telework boom (what’s the point of paying for electricity to run a workplace staffing 30 employees, if only half of them actually work on site?);
• being part of a “greener” approach and strengthening its brand image;
• encouraging customers to monitor their consumption in real time for greater transparency;
• building customer loyalty by sending personalized content based on the amount of energy consumed (“Be careful, you’re about to exceed last month’s electricity consumption threshold”).

Basically, it’s all about setting yourself apart from the competition by delivering an optimal user experience.

As it becomes a particular point of attention and optimization, you give yourself the chance to automate multiple tasks and provide considerable time savings to all the teams involved.

In addition to sales administration, sales will appreciate the ability to focus on retention or upselling with data provided at or after billing and revenue recognition. Finance departments will see their cash management greatly improved. In fact, all departments will be positively impacted thanks to an integrated and 360° view of customers and the possibility of even more efficient performance management, including sales forecasts.

Finally, invoicing and its management will be optimized to rationalize efforts and make everyone more accountable throughout the customer life cycle.

The importance of customised professional services: the example of SaaS solutions

Pay-per-use is also finding its way into the professional services sector. Many B2B services are destined to be adapted to the usership economy. The case of SaaS solutions is a very good example.

Ultimately, service providers generally provide a range of subscriptions whose price differs according to all the included services:

On paper, the formula seems interesting. However, it severely lacks flexibility. Pricing often acts as a brake, because the subscription fee for an additional service does not reflect the real cost of use. The customer’s desire to leave and see if the grass is greener elsewhere is a real risk for the SaaS company.

Addressing this problem by bringing the user closer to a pay-as-you-go model will contribute to user satisfaction. If a customer feels that he’s paying the right price, depending on the way he uses the various services, he will be able to optimize his investment according to his needs. Why should you change your SaaS provider when you have such perfect control over your expenses?

Industry: consumption-based billing to encourage innovation

The industry sector has always been linked to innovation. However, this requires a willingness to invest. Today, few companies are willing to take such financial risks. So how can some companies continue to grow in a business environment, where equipping themselves with more efficient machines is almost impossible?

To bridge the technology gap between industry players, pay-per-use billing is gaining ground. For example, a company can provide a customer with a state-of-the-art machine based on its actual usage. 

Picture this. A food industry player wants to bag its products using packaging that meets the latest recycling standards. However, the basic investment to buy a suitable machine is too high. The company therefore decides to hire a service provider to make its equipment available. Here, it’s not a question of paying for the loan of the machine, but rather for the number of bags produced. It is then very easy to control the number of products output by the machine and to adjust the billing as needed.

Another example could be a steel supplier operating in the automotive industry. Forced to work on a just-in-time basis, each player must constantly adapt itself to supply chain fluctuations as a whole. 

Actually, coachbuilders and automotive suppliers’ steel or aluminium needs are constantly changing throughout the year, depending on manufacturers’ needs. Therefore, suppliers would be well advised to offer a pay-as-you-go invoicing model based on the manufacturers’ need for flexibility. This economic model is more flexible and guarantees all the players a healthier management, adapted to the economic situation.

Addressing this problem by bringing the user closer to a pay-as-you-go model will contribute to user satisfaction. If a customer feels that he’s paying the right price, depending on the way he uses the various services, he will be able to optimize his investment according to his needs. Why should you change your SaaS provider when you have such perfect control over your expenses?

Pay-as-you-go model: a successful model for many different business sectors

Finally, consumer billing lends itself to many business sectors. In today’s inflationary economic climate, its great flexibility wins over both service providers and consumers who are used to working on a just-in-time basis. In order to increase attractiveness and customer loyalty, a company is best advised to provide part of its services on a pay-as-you-go model basis.