Nowadays with the competition increasing, it is crucial to understand your target audience and provide them with the best solutions possible. SaaS-based business solutions are one such example that makes the life of organizations easier. To make it even more productive, it is essential to choose the right kind of billing model for the SaaS business.
There are multiple factors that you need to consider before you can settle on the right billing model. Factors such as the value you aim to deliver to your customers vs the revenue you wish to earn, what sort of brand you want to develop, and the mindset of your target audience.
In order to be a successful SaaS-based business you have to provide customers with tailored services. This includes selecting the right type of billing model. Let’s look at a few popular billing models for SaaS to help you better understand the appropriate fit for your business.
Types Of SaaS Billing Models
With the constant innovation in technology and businesses, some methods are more popular than others. Following is a few of the many billing models commonly used for SaaS businesses:
- Metered Billing
- Flat Fee Billing
- Hybrid Billing Models
Metered billing system sometimes is also known as a usage-based billing system is based on the consumption of the user. This means that the price they have to pay is directly proportional to their level of usage.
Normally, in this billing model, the user is charged a base fee for the standard services used, and for add-on requirements or units of consumption, they have to pay accordingly.
This gives customers peace of mind that they are only paying for what they are using and not incurring extra costs. Insightful data can also be mined through this method since you can track what services are popular with the customer and at what times. This makes positioning the product comparatively easier since you already have inside knowledge of customer preferences.
Flat Fee Billing
As the name suggests, in this billing model for B2B SaaS businesses, the user is charged a standard fee for all features and levels of access. Although, new models of billing systems have taken over the world of SaaS. The flat fee method is still a good choice for companies that provide tangible products. Such as newspapers, usually, a standard fee is charged for the whole month or year.
Another example is Netflix, which initially operated on a flat-fee billing model. However, they switched to a tiered pricing structure since it brings in more revenue and value.
The best part of this pricing model is the predictability and easy-to-understand process. It is ideal for businesses that do not involve a lot of the latest technology or innovation on regular bases.
Hybrid Billing Model
The hybrid billing model is a combination of two billing models that serve to accommodate the customers as per their requirements. The typical hybrid combinations are as follows:
- Tiered Billing model + per-user billing model
- Tiered Billing model + custom model
- Tiered Billing model + pay-as-you-go, billing model
This billing method allows room for flexibility according to the needs of the customers. With so many competitors out there, the best way to keep your business relevant is to meet the preferences of the customers at every step.
The hybrid model is popular, thanks to the fact that it can be customized around the customer’s requirements and usage. The combination of a tiered pricing model means that you can cash in greater revenue while retaining your older customers. Since there may be customers who do not wish to upgrade to further levels or additional features while there might be others that do.
Grow Your SaaS Business with The Right Billing System
Choosing the appropriate billing model for your SaaS business is a key component of your success. The good part is that with evolving technology, easier and more convenient methods keep coming to the light. By making sure that you incorporate the most optimal billing method, you can ensure recurring customers. That is the fundamental rule of scalability and sustainability for any SaaS business.
This is a versatile model that adapts to the needs of the customer and presents them with plans that best meet their needs. By identifying their users’ subscription behavior and activities related to obtaining services, SaaS businesses can create hybrid billing models for their customers.
A billing model is critical for any SaaS business. The model can be adjusted in response to market demand and economic changes in digital space patterns. Online businesses can liquidate the customer lifecycle with recurring pricing billing models to provide the best possible customer experience. Not only that, but selecting an appropriate billing model can contribute to increased business revenue and brand recognition.