6 Reasons Why you Need to Invest in Usage-based Subscription Plans

When you start your own company, finances are going to be a make or break for your business. Your pricing affects your user base more than the product itself. If you have a standard product and you are over-charging your clients, they’ll feel like you are ripping them off. Meanwhile, your competitor will be selling the same product at a sub-standard price and hence be able to poach your clients.

The more loyal you are to your client (price-wise), the more loyal your client will be to your business. Surveys have shown that even a 5% increase in your customer retention can increase a company’s profit up to 25%.

Usage-based subscription plans have seen significant popularity in the SaaS business over the years. Clients only want to pay for the services they use instead of paying an up-front price without even using the product beforehand.

SubscriptionFlow does just that!

As you see traction in your business you can change your subscription plan according to your requirement and pay just for that. Sounds like a dream come true right?! Well, let’s explore more about usage-based subscription plans in this article.

What are usage-based subscription plans?

Usage-based pricing is a consumption-based pricing model in which the customers only have to pay for the product or service they use. Usage-based pricing is also known as metered billing. In usage-based, the customer is typically charged at the end of the billing cycle.

Usage-based subscription plans allow the user to strategize, evaluate and adjust the cost-efficiency of their business by using an activity-based costing strategy.

The basic example of usage-based billing is electricity and gas bills. These bills run on metered billing, and the customer only has to pay for the Kilo-watt of electricity they have used. In another example, Uber only charges the client based on the miles they have traveled.

Why shift to a usage-based subscription planning system?

There are two major reasons to switch to a usage-based planning system:

First- Companies (who are price-sensitive) get a clear understanding of the product they are using and the amount they are being billed for using the particular service or product.

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Second- Companies can study the cohorts of the customer using their services and hence be able to identify the strongest potential revenue point in their business.

Pros of using a usage-based subscription planning software:

SubscriptionFlow charges its client based on the usage-based planning system. This allows the user to be able to identify and single out the revenue points and execute and strategize according to the massive consumer-used service of their company.

1. Soar through the growth ceiling

There comes a time when growth hits a stagnant bump in your business. Even with offering multiple add-ons, services, and promotions the growth is just not happening the way you want it to. SubscriptionsFlow removes this hurdle very easily. By using usage-based subscription software (likely SubscriptionFlow) your revenue retention will increase.

With the usage-based model, you will be able to generate more leads and pinpoint the focal revenue point. This will provide you with the opportunity to step outside the box and scale your business growth in the right direction. Only paying for the services the customer is using makes them more susceptible to subscribing to more of the services.

2. Customers end up loving your product

If people can start using your product at a marginal price, your customer count will grow substantially. SaaS companies on usage-based billing have seen up to 10 times more usage of their product.

“Usage-based pricing is the hallmark of a SaaS organization with a clear POV on strategic pricing and monetization.”

Usage-based model is a driving force that adds value to your product and increases customer volume.

3. Likely to get more investors

If you have been waiting for investors to make a play at your business, then chances are your numbers have not been seeing a steady increase. To investors, the usage-based model is a risky move. But investors are all about the numbers.

Seed stage companies following the usage-based model have seen a rapid increase in their revenue. This could be a marker that usage-based pricing is going to dominate the market in the future.

4. Usage-based model equals value-based model

A value-based model sets your company apart from the competition. This model means that the pricing of your product is based on the value that it is going to provide to the customer. For every package that your company offers, the customer will retain the maximum output of it.

A study by Forrester and Gotransverse found that 72% of SaaS organizations planned to try a usage-based pricing model in the coming months.

To utilize the usage-based model up to its maximum capacity you need to identify the right key metrics:

• Is the usage metric in alignment with your product?
• Is the usage metric quantifiable and predictable?

5. Your competitors have already switched

Since, the usage-based subscription planning system is measurable, predictable, and valuable, more and more companies have made the switch. You are likely to attract more funding and investors for your business with the usage-based model.

All the big companies for instance; Stripe, Slack, HubSpot, etc. are all using the usage-based billing method. We have all seen the drastic shift in their revenue and stocks ourselves.

6. A strong foothold in the market

Tech is ever-evolving and so is its market. If you want to make your company future-proof you need to think ahead and plan. Predictions have determined that the usage-based model is going to become the default pricing model in the upcoming time. Every company is predicted to integrate usage-based planning software in one way or another. So, think ahead.

Simply…

Do not underestimate the power of this model, if implemented correctly, it will propel your business forward and break the growth ceiling indefinitely. SubscriptionFlow is going to help you in this matter. Rather than dragging down your revenue SubscriptionFlow is going to help increase your revenue, dislodge customer churn and make sure you are getting the best value out of your product. Schedule your Demo today and get on the list of future tech companies!