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The Benefits of Usage-Based Pricing for New Digital Business Models

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The subscription business model has exploded in recent years. By 2025, it will be worth an estimated 1.5 trillion USD1. But this model has its downsides: As the subscription market grows, it becomes increasingly difficult for businesses to stand out. Consumers are also beginning to suffer from ‘subscription fatigue’. 72%2 of US consumers believe there are too many subscriptions, while European consumers are some of the least likely to sign up for new subscription plans3. Companies must act quickly to prevent churn and attract new customers. They need to rethink their operations, implementing innovative digital business models and consumer-centric pricing models such as usage-based pricing. But what are the benefits of a usage-based pricing model exactly? Is it worth it to adopt one? Here’s what we’ve learned.

Usage-based pricing benefits both customers and businesses

You must select the right pricing model when developing an innovative digital business model. It should align with customers’ needs, preferences, and expectations, while also supporting your business’s growth goals. If it doesn’t, you’ll struggle to attract and retain customers.

Usage-based pricing is a highly scalable, flexible, and appealing pricing model when creating new digital business models.

How does usage-based pricing benefit customers?

Usage-based pricing is personalized, fair, and easy to understand—and those aren’t the only benefits. There are a lot of benefits that usage-based pricing offers to both B2B and B2C customers.

  • Customer-centric and appealing: Charging consumers based on their usage is fair and provides clear value for money. By offering a transparent pricing model such as this, you’ll boost customer satisfaction.

  • Value-driven: Customers appreciate knowing that they only pay for what they use. This fairness fosters trust and loyalty, creating a natural connection between the price and the value received.

  • Easy to understand: Customers crave simplicity and clarity regarding billing. With usage-based pricing, they pay for what they use and only use what they need, making the model transparent and straightforward.

  • Low barrier to entry: This pricing model’s pay-as-you-go structure minimizes the initial commitment from customers, making it more accessible and less risky for those interested in trying out a new service or product.

  • Cost-effective for new customers: Usage-based pricing is an attractive option for newcomers as customers can pay only for what they need.

  • Customers have control over their budget: As the pricing is directly tied to usage, customers have clear control over their spending. If they grow and start to use a product/service more, they’ll pay more. If they use it less, they’ll pay less.

Discover how Nitrobox enables usage-based pricing

Recurring Billing

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Subscription Management

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How does usage-based pricing benefit businesses?

Usage-based pricing doesn’t just help customers—businesses also benefit by implementing this pricing model.

  • Faster acquisition through low barriers of entry: By offering personalized price points and fair value, usage-based pricing attracts a broader customer base. This enables businesses to grow faster and more effectively.

  • Shortened sales processes: This model streamlines the path from customer interest to purchase by removing complicated pricing structures. Simplicity in pricing leads to quicker buying decisions and more efficient sales cycles.

  • Usage-based data boosts customer understanding: Usage-based pricing allows businesses to gather extensive data, IoT Data as one example, on customer usage patterns. These insights enable companies to better understand how their customers use their products, allowing them to develop more tailored products.

  • Builds customer loyalty and lowers churn: Customers feel like they’re receiving great value for money, which enhances loyalty and reduces customer churn.

  • Higher net dollar retention (NDR): Usage-based pricing has been found to increase NDR by 10%.

  • Easy to offer discounts: The usage-based pricing model is flexible, making it easy to incentivize further usage through discounts. This creates opportunities for upselling and expanding customer relationships.

  • Allows for easy experimentation and adjustments: With a usage-based pricing model and the right software, it’s simple to adjust the pricing model, experiment with recurring revenue, and test whether these changes affect consumption. Businesses can constantly innovate and optimize their approach.

  • Wide variety of usage data to serve as core pricing metrics: This model offers a broad spectrum of usage data that can serve as core pricing metrics, providing flexibility in pricing strategies.

  • Easy to experiment across different markets: The agility of usage-based pricing allows businesses to test and find what works best in various markets.

  • Quick to respond to changing business requirements: Usage-based pricing is a dynamic model that can rapidly adapt to fluctuating business needs and customer habits. This helps your company stay relevant and competitive.

Embrace the future by implementing usage-based pricing via Nitrobox

It’s becoming increasingly difficult to stay competitive in today’s business landscape. However, by introducing a usage-based pricing model, you can align with changing customer preferences and combat disruptive market forces.

In other words, you can safeguard your business’s future.

But how do you successfully implement a usage-based pricing model? How do you translate the theoretical benefits into practical, tangible results?

That’s where Nitrobox comes in.

Nitrobox is your strategic software partner that offers a smart monetization and billing platform. It is committed to helping you take any digital business model – from subscriptions, pay-per-use, digital one-time transactions, to any hybrid model – to market, launch new products or scale your business. It provides all order-to-cash capabilities in its central platform ranging from smart contracts, billing and invoicing, revenue recognition to payments and dunning.

Are you ready to get started with your new usage-based business model? Then schedule a personal Nitrobox demo to see the full scope of our product features.


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