What is “Usage thresholds” ?
“Usage thresholds” is a type of subscription billing strategy in which customers are charged based on their usage, but there is a cap or threshold for the maximum amount they can be charged in a billing cycle. This model is ideal for businesses that want to provide customers with usage-based billing, but also want to limit the potential for unexpected charges.
For example, a software company might offer a subscription service that charges customers based on the number of users or the amount of data they use, but with a cap on the maximum amount they can be charged in a given month. This provides customers with the flexibility to use the service as much as they need to, without the risk of unexpectedly high charges.
Usage thresholds can help businesses generate revenue from customers who use their product or service frequently, while also providing customers with a sense of control over their spending. However, they can be challenging to manage if usage patterns are unpredictable and may not provide a steady revenue stream for businesses.
5 examples of businesses that use usage thresholds as part of their subscription billing strategy:
- Internet service providers: Many internet service providers (ISPs) offer usage-based billing plans, where customers are charged based on the amount of data they use each month. These plans typically have usage thresholds, after which customers are charged an additional fee for each gigabyte of data they use.
- Cloud storage providers: Some cloud storage providers use usage thresholds to charge customers based on the amount of storage they use each month. Customers can select a pricing plan with a certain amount of storage included, and if they exceed that limit, they are charged for additional storage.
- Health insurance providers: Some health insurance providers use usage thresholds to determine how much customers should pay for their insurance premiums. Customers are charged based on the number of doctor visits, medical procedures, and prescriptions they use each year.
- Electricity providers: Some electricity providers use usage thresholds to determine how much customers should pay for their electricity bills. Customers are charged based on the amount of electricity they use each month, with higher usage resulting in higher bills.
- Fitness apps: Some fitness apps use usage thresholds to encourage users to exercise more often. Users may be charged a monthly fee for access to the app, but they can also earn rewards for reaching certain usage thresholds, such as running a certain number of miles or completing a certain number of workouts per month.