State Based Subscription Pricing
Subscription Flexibility and Contract Commitments
The Evolution of Subscription Billing
In recent years subscription billing has gained major steam, becoming the preferred billing model for business offering subscription services and their customers. Both benefit from the impact of predictable monthly billing on cash flow. From software as a service, to over-the-top video, major companies have made the move.
This has not come without its challenges for companies moving from traditional billing to subscription billing models.
The growing complexities of accounting for churn rates, revenue leakage, payment gateways and alike are not simple problems.
Fortunately, the LogiSense subscription billing platform provides flexible solutions to ensure full monetization of subscription customers and that no revenue opportunity is missed.
Revenue Opportunities in Subscription Billing
There are many different ways to implement a subscription billing model to provide creative services to your customer base. Having a flexible billing system is key to insure that the subscription services that you want to deploy are able to be implemented quickly in order to beat your competition.
Software as a Service (SaaS)
Providing your software as a subscription service continues to be one of the fastest growing models for bringing products to market.
Many large scale complex software systems can be deployed and managed by the service provider, thereby off loading IT and infrastructure requirements for your customer and decreasing CapEx spending.
One of the biggest challenges in providing SaaS subscription models is finding creative ways to offer your service to compete with the pricing models of your competetor. A new trend of pressure from customers to only pay for what they use in a SaaS business model is one you'll want to be ready for as the market changes.
Over The Top Service
"Over the top" refers to these services providers' delivery system and subscription business model, opting for the delivery of their services over the Internet.
OTT subscription service providers have created focused, lean Internet services to dominate the market at a growth spurt worth $8 billion in potential revenue.
While B2C subscription models focus on delivering entertainment, the B2B OTTs tend to deliver a platform for advertising and/or communication, often creating a new niche for end-to-end service as long as the customer has an Internet connection.
eCommerce Subscriptions
Subscriptions for what were once one-time purchases for regularly used products is a great example of creating recurring revenue while removing the burden of repeat orders for the customer.
There are so many great examples of these services available now from the Dollar Shave Club to pretty much anything you can think of from wine, gift boxes, socks, you name it.
Providing an easy to use service that delivers your product to your customer without them having to continually re-order creates a frictionless way to purchase your products and a consistent, predictable, revenue stream.
Check out our Step-By-Step Guide to selecting a Modern Billing Solution
View GuideConsiderations When Deciding on Subscription Billing
At first, subscription billing seems like a pretty simple concept. Provide a price for your service on a certain interval and sign up the customer. However, it gets much more complicated than that when many different variables such as volume/tiered pricing, discounts, contract commitments and even possible blends of both subscription and metered usage are requested by the customer for a personalized deal.
Volume Pricing
When defining your product offering you may want to consider tiered pricing to handle subscription charges based on volume. Tiered charges can be applied to a service to set pricing thresholds based on service volumes. Tiered charges may be configured through the product catalog but then you may also want to provide customized pricing at the account level.
There are two types of tiered pricing models:
- Bracket: The price charged for all counts of that service is based on the price tier that the service number falls into
- Progressive: The price charged for all counts of that service is based on a progressive scheme where the first X number of services are charged tier 1 prices followed by the next tier of services charged tier 2 prices etc.
The table below shows a sample calculation of bracketed and waterfall pricing based on tiers.
| Tier Threshold | Price |
| 0-100 | $2.00 |
| 101-200 | $1.50 |
| 201-300 | $2.00 |
| Tier Type | Sample Calculation |
| Bracket Pricing : 250 Device Purchase | 250 devices * $1 = $250 |
| Progressive Pricing: 250 Device Purchase | (100 devices * $2) + (100 devices * $1.50) + 50 devices * $1 = $400 |
Personalized Contracts
To give your customer the subscription rates that they are looking for you may need to create a unique contract. LogiSense's powerful contract inforcement ensures your customers meet their agreed upon terms for special pricing. Ensure that you're capturing the agreed upon revenue when customers under commit.
Contracts
Apply the flexibility of both line item and account based contracts. Specify your contract renewal terms, termination statuses and if contracts should co-terminate.
Commitments
Apply volume commits, ramp-up schedules, minimum spend amounts, usage amounts, number of connections and under commit penalties.
Early Termination
Model early termination charges (WHATIF analysis) and create Tiered termination penalties for when contracts unexpectedly terminate early.
Challenges in Subscription Billing Models
To successfully monetize a subscription billing model you will face several new challenges. As your customer base expands they will want to consume your products in different ways. They also may want add-on products that are not provided under a subscription model. The trick here is to expand product offerings while at the same time reducing customer churn rates.
Multipe Currencies
As you move your subscription offering into new regions currency specific pricing may be needed to stay competitive in that market.
Reducing Churn
Keep an eye on underlying analytics to determine trends when customers churn. Create quick, easy to understand, dashboards to highlight these findings.
Secondary Products
Offering secondary products to your subscriber base is another great way to reduce customer churn. Find ways to mix both recurring and one time service offerings.
Dunning Process
How do you automate when a customer doesn't pay? You'll need a system that will track down missed payments and automatically suspend if needed.
Growing Your Channels
In order to compete, subscription providers frequently need to adjust models in order to accommodate companies reselling their services or wanting to market their own.
Service providers familiar with subscription billing models have an opportunity to share revenues with these companies.
How LogiSense Subscription Billing Maximizes Your Monetization
In the world of hyper personalization, you need to be able to offer your customers subscription billing options that help (not hurt) your top line. You may need to be able to offer À la carte usage based products alongside your subscription products. You'll need to be able to mediate all usage data to properly support product tiers.
Product/Service
LogiSense's 2-tier structure creating products as a combination of multiple services creates extreme flexibility for creative pricing to beat your competition.
State Based Pricing
Define different prices for your subscriptions based on the state of the service. Configure state pricing for the lifetime of service entitlements.
Multi-Currency
Configure your product catalog pricing in multiple or one base level currency. Customers will be invoiced either set pricing for their currency or based on an exchange rate.
Consider Adding Metered Usage to Subscriptions
Rate any type of usage data from simple to complex. Whether it be data, voice, SMS, APIs or any kind of recordable event record, LogiSense's real-time rating engine has you covered.
Offer Share Plans, Inclusions & Pooling
Create variable, fixed, individual and tiered usage allocations. Pools can be defined accross multiple accounts, individual accounts or individual services. Once included usage is exceeded overage charges are applied.
Creative Pricing Options
Offer customers individual billing plans and products with ease. With easily configured pricing plans, empower your marketing team to quickly test and roll out new product/service offerings.
Usage Mediation
LogiSense's powerful data import tooling allows for easy consumption and mediation of usage data. Capture lost revenue by managing exceptions.
Visual Configuration
Leverage the visual data mapping tools to map usage feed fields to meaningful objects used during rating. Apply built-in formulas for trasformation and mediation decisions.
Customization
Add custom fields to your usage feeds to track important data for rating or analytics. For complex logic leverage the mediation plug-in architecture for forumulas.
Interested in a demo? Check out the LogiSense online Demo Library
Online Demo