What is “Usage-based billing” ?
“Usage-based billing” is a subscription billing model where customers are charged based on their usage of a product or service. This model allows businesses to charge customers based on how much they use a product or service, rather than a flat fee. For example, a business offering a cloud-based storage service may charge customers based on the amount of data they store, or a video streaming service may charge customers based on the amount of time they spend watching videos.
Usage-based billing can be structured in different ways, such as charging customers for a set amount of usage per month, or having different pricing tiers based on the level of usage. This model is ideal for businesses that want to encourage customers to use their product or service more frequently, or for businesses that offer a product or service that is used infrequently or on a sporadic basis.
Cases
5 examples of companies that use a usage-based billing strategy:
- Amazon Web Services (AWS): AWS provides a range of cloud computing services to businesses, which are charged based on the amount of computing resources used by the customer. This usage-based billing model allows customers to pay only for the resources they need, and the pricing is structured to incentivize customers to use more resources over time.
- Uber: Uber’s pricing is based on usage, with customers paying for the distance traveled and time spent during a ride. This usage-based billing model allows customers to pay for the service only when they need it, and encourages customers to use the service more frequently by offering promotions and incentives.
- Twilio: Twilio provides cloud communication services to businesses, which are charged based on the number of calls, messages, and other communication events processed by the customer. This usage-based billing model allows businesses to pay only for the communication events they need, and offers a range of pricing options to accommodate businesses of different sizes and needs.
- Zoom: Zoom’s video conferencing services are charged based on the number of hosts and participants in a meeting, and the length of the meeting. This usage-based billing model allows customers to pay only for the meetings they host or attend, and offers a range of pricing options to accommodate businesses of different sizes and needs.
- Salesforce: Salesforce provides a range of cloud-based customer relationship management (CRM) tools to businesses, which are charged based on the number of users and the features they use. This usage-based billing model allows businesses to pay only for the tools they need, and offers a range of pricing options to accommodate businesses of different sizes and needs.