Intelligent Monetization - What it Means and Why You Should Care (Part 2)
Getting Started: Making the Shift from Subscription to Usage-Based
There is a reason mid-market and enterprise companies are making the move to usage-based models.
In the beginning of a company’s lifecycle the advantages of subscription models tend to outweigh the disadvantages. After all, how complex can things get when you’re first going to market? And how custom can you afford to be? Isn’t it better to lock everyone in with the same terms?
But, over time customer expectations evolve.
Now your customers want to know exactly what they are using, when and how, and how much it will all cost – for their own specific business. While this is a seemingly simple ask, it isn’t simple to deliver via subscription. Suddenly you realize that the requirements of your customers have outstripped the capabilities of your previously useful subscription billing platform. Neither your company, nor your customers, are maximizing your relationship because your billing platform can’t evolve fast enough.
This is where the best-in-class usage-based platforms really shine, because they offer a level of transparency that subscriptions models simply can’t. Consider some of its key operational principles:
1) Customers pay only for what they use as they use it
The concept of usage-based billing suggests underlying transparency, at the most basic level – billing for what is being used, nothing more, nothing less. No wasted user licenses, no subscriptions that are underutilized and no overpaying for products or services because they are locked into a contract. The customer gets what they pay for, and doesn’t feel like any of their investment has been wasted.
Next steps you can take:
Identify potential usage metrics within your platform or service offering (Examples could include: users, data volume, storage capacity, hours of usage, deposits, revenue under management, devices under management, etc.)
Determine whether your existing billing infrastructure is capable of supporting a usage-based model. Most legacy systems aren’t designed to support usage-based without significant amounts of custom code development.
Look at how you structure your business from revenue operations (deal management workflows, forecasting, etc), and finance operations (sales compensation, reporting & analytics, etc) and assess what might need to be changed to support a usage-based model
2) Customers can buy products and services without complex upfront contracts
Contracts that lock customers into any blanket requirements fly in the face of true usage-based billing. They also aren’t transparent, because they obscure what is actually happening behind complicated terms and conditions.
Next steps you can take:
Identify areas in your selling process, whether digital or physical, that might be impacted by complex pricing.
Identify partner or other channels that might be impacted by a shift to complex pricing.
3) Engage and inform customers more effectively via a Self-Help portal
The right platform delivers billing clarity via self-service technology that gives visibility into the spend, on the fly, without manual interventions. It can handle potentially millions of monthly unique bills, including multi-payer network or marketplace billing, while ultimately delivering single, customized bills to the customer, even in the face of extremely complex payouts or subsidiaries.
Next steps you can take:
If you have an existing customer portal, assess its ability to support user dashboards, detailed interactive invoices, usage volume at scale, etc.
Getting Started: Replace Rigid Operational Systems to Increase Organizational Agility
Your business has likely become more sophisticated over time, and you likely have many valuable customers with different requirements. Your relationship with a top 10 healthcare company might look nothing like your engagement with a Fortune 500 bank which might look nothing like your connection with a national insurance company, and all of them want to negotiate the best possible terms – for their own business. They don’t want to be treated like just another customer in the queue, instead they want custom, specific and flexible terms that are designed to meet their unique needs.
And, importantly, they often don’t ask for simple terms of engagement. Working with large organizations usually introduces a complex web of parameters, terms, deliverables and agreed upon outcomes, which your operational systems need to be able to handle seamlessly.
So, what capabilities do your operational systems need to be able to support? Intelligent Monetization operational systems will enable your organization to:
1) Accommodate any pricing scenario with a flexible billing platform
Being boxed into a business model because of the limitations of your billing platform just doesn’t make sense anymore. There are a variety of more flexible options that you can choose from including:
minimum + overage
pick-a-tier and fill-a-tier
pooling and credits
threshold for price changes
rollover of credits/ license fees
time-based price variability
surcharges for excess usage
hybrid/complex scenarios of several price strategies
multi-payer & payee marketplaces
discounts and promotions
Pricing models will continue to grow and evolve, and your billing platform needs to easily adapt and enable you to meet the changing needs of your customers and your business without significant cost or effort.
2) Customize pricing at the deal level
The selected platform should support complexity at enterprise scale – managing not one scenario, or 10 scenarios – but potentially 100s to 1000s. The ability to customize pricing all the way to the individual deal offers your business a significant competitive advantage when compared to organizations that are locked into system-wide models because you can maximize each relationship.
3) Bring new products and pricing changes to market quickly
By creating in-the-moment usage-based models companies can eke out every bit of revenue possible from current and prospective customers, all while delivering an overall better customer experience. It is essential that you can easily test, model & deploy pricing models and catalogs, using multiple metrics and dimensions, And, the ability to do so without requiring back-end coding and complex changes is what cements the flexibility of the model. Ideally there is a simple drag-and-drop interface that offers a quick visual snapshot of the modeled changes, while powerful technology capable of instantly made the changes on the backend.
Getting Started: Let’s Get Visual
So, how can you be sure the chosen systems are accurate? How can your organization be sure that what you’re promising can actually deliver real, accurate and timely results? Lines of code are meaningless to most of us. Deep dives into the back-end require specialized developers and a lot of time and money. So, making the complex simple though data visualization is critical.
This makes any chosen system inherently more useful to the finance team, sales team, legal team, etc. all of which want an operations-first platform that enables them to easily see, understand, and manipulate operational data.
1) Look for the ability to extract and consolidate disparate billing data such as client hierarchy, product volume, and pricing – scaling up to hundreds of millions of invoices. This can be properly accomplished by pulling billing data from existing systems and consolidating as needed, without significant interventions or customization. You must be able to manage everything with the full confidence that what you’re charging only represents what the customer has used, nothing more and nothing less.
2) Systems should be able to reconcile payments and bills across hundreds of payees or partners, including ones that are blockchain enabled. You can even look for options that are sophisticated enough to support tax calculation at the transaction level, ensuring the appropriate tax is applied every time.
3) Once there, interactive invoicing supports any amount of deep diving you or your customer want to do. This needs to work from simple invoice presentation and generation to more complex marketplace payouts.
Again, accuracy underpins the relationship between you and your customer, so having the same clear data to review – on demand – builds trust.
Summing it all up
If you remember nothing else, remember this. The market is moving at light speed and shows no sign of slowing down. Keeping up (or better yet leaping ahead) requires new ways of thinking. Don’t let the limitations of existing operational systems (billing, pricing) be the gating factor for your business strategy.
Intelligent Monetization, done right, absorbs all the complexity you can throw at it. With transparency, flexibility and accuracy, Intelligent Monetization enables you and your team to stay focused on the big picture – building a company that will stand the test of time, and enabling you to be ready for the future, whatever it may bring.