You’re at the right place to understand what metered usage is all about, step-by-step.
This blog will give you perfect insights into metered usage with examples, benefits, risks, and challenges.
Also, we’ll help you make a more informed decision about whether metered billing is the right choice for your business.
Let’s dive in!
Table of contents
What is metered usage?
Metered usage is a billing technique where customers are charged based on their actual product or service usage.
This billing model is typically used in utility services such as electricity and water and telecommunications services like mobile phone plans and internet services. It works pretty well when you charge your customers based on their consumption during the billing cycle instead of explicitly setting fixed quantities or predetermined packages.
Let’s look at a few examples.
Metered usage examples
As we said before, metered usage, it’s a kind of subscription billing model that charges users based on their annual usage. It can be monthly, quarterly, or yearly. With the ability to charge your customers for their usage, there’s no limit considering the determination of the unit.
There are a few examples of how businesses can charge customers based on metered usage:
1. Utility companies, such as electricity or water providers, charge customers based on the amount of usage measured by a meter. They typically bill customers monthly or quarterly and charge a rate per unit of use. Once they cross this limit, they can be charged extra for every additional consumption unit.
2. Telecommunications companies, such as mobile phone operators, charge customers based on the usage of services such as minutes, texts, and data. They typically bill customers every month and charge a rate per unit of usage.
3. SaaS providers offer their services on a subscription basis but charge for usage like sending emails, sms, and processing a certain number of records. For example, you can measure how many emails your customers send per month. After that, you can bill them for the total number at the end of the month.
4. Cloud computing services, such as Amazon Web Services or Microsoft Azure, often charge customers based on the usage of resources such as storage, bandwidth, and computing power. This usage is measured and billed on a pay-as-you-go basis, with customers paying only for the resources they use.
5. Gym owners can charge their members based on the number of visits they make to the gym.
6. EV charging providers or car rental companies charge based on distance and time usage of the vehicle.
Metered billing – it’s the best option for your needs!
So, are you at a point where you have to select the appropriate recurring billing model for your business?
You must consider trying a metered billing model if your answer is yes.😉
Metered billing is a perfect fit for every business where customer consumption drastically impacts operating costs.
But before you decide to use metered billing, you should first consider whether it is suitable for your business and if metered usage impacts your business. No matter what, metered billing is perfect for both: customers and businesses.
Let’s explain this picture in more detail…
Energy & Utility: Unlocking Its Full Potential
Benefits for companies and their consumers
First, metered usage with metered billing can benefit customers who use less than the average amount. Second, the company or service provider can benefit from this because they can better match costs with revenue.
For example, a customer that uses more water or electricity will pay more than one who uses less, and a customer who makes more phone calls or uses more data will pay more than one who uses less.
What’s good about metered usage is that customers are charged based on the actual usage of the product or service. Therefore, they don’t feel like they are being charged unfairly for the features they don’t use. Technically, they know that the more they use your product or service, the more they’ll pay. This helps them feel that they are in control, as they are accurately paying only for what they use.
And also here are some benefits for businesses.
As a business owner, you can easily understand customer behavior and consumption. Also, how they think and feel.
Analyzing customers’ behaviors allows companies to understand what the consumers want and need and, most importantly, why they think this way. The insights that metered usage can offer your business can improve more than just customer lifetime value (CLV); they can help you understand the need for potential future developments.
For sure, your revenue grows along with your happy customer base.
Risks that metered usage brings
We have to admit; there are some risks too.
Prevention is better than cure, right?
Firstly, with metered usage, it’s hard to predict the revenue because you don’t know how much your customers will use the product.
Also, the highest risk comes with selecting the right partner. The integration of metered usage into your system requires a team of highly skilled and experienced developers. It could be challenging to set it up due to custom design and configurations.
Again, a proper billing system like that must operate 24/7 without any problems. If the system fails, you, as a product or service provider, can lose revenue and, more importantly – customers.
Determination of the right pricing model
A suitable pricing model for your metered billing is crucial.
That’s why you need to think like your customers and base your decision on the consumer data generated.
Understanding usage-based pricing will help you choose the right pricing option and determine the best price for your product or service.
Carefully check the various product or service pricing types since every model has advantages. With our experience, we can help you in making this decision.
Conclusion
Are you finally ready to integrate metered usage into your business model?
Well, Tridens can help! We have the best billing platform for your business, which improves a metered billing model for your needs and helps determine the best price for units.
Want to get more information about our solutions? Leave a comment below or Schedule a Demo!
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