How ready is your business for usage-based billing?

3 recommendations for how B2B organizations can drive revenue and enhance the CX through a consumption billing model

Many enterprises are in the process of shifting from a one-time transaction to a recurring revenue model, which commonly includes both subscription and consumption-based models. In the B2C world, companies may be able to navigate this change through fixed fees and an “all-you-can-use” pricing structure. But on the enterprise side, customers require far more flexibility, transparency and customization.

In a recent panel, The Role of Usage-Based Pricing in Driving Revenue and Customer Experience, three lead-to-revenue experts— Andreas Zartmann, CEO, DigitalRoute, Sean Joyce, CTO, Navint Partners, and Mike Aaron, Product Management, Salesforce Revenue Cloud—sat down to discuss how B2B companies can manage the shift to a usage-based model.

1. Take a data-first approach.

Usage data – telling you how your products and services are used – has purposes far beyond billing. When combined with an effective strategy and proper tooling, companies can use usage data to determine how to structure new quotes or payment tiers, as well as optimize existing services.

“The core of all digital services is usage data,” explains Andreas. “The system that manages that data needs to be purpose-built to scale revenues and meet the needs of your quote-to-cash process.”

“It’s important to look at the usage data and leverage that information to make decisions about where to take the product,” agrees Mike. “Examining the way your customers are using your services and being able to react to that data in real-time is critical.”
One common misstep companies take is to focus on data at the application level, which creates a lot of manual work later as teams need to stitch together different data streams to create a holistic view across the entire lead-to-revenue lifecycle.

“A major mistake that we see is not to have a data-first approach across all applications,” says Andreas. “The complexity around this business model means that you must not only find the data components but put the data set together so that it can interact with all these different applications on top.”

“The only way to effectively leverage usage data is to have a system like DigitalRoute’s platform take that usage data and turn it into different buckets of data that can be used in different ways,” agrees Sean. “It’s not just having the data, but also processing it in a way that will add value to the business, across all functions.”

2. Build with flexibility in mind.

Companies that are building their system to support the way they sell and bill today must also consider how it will enable the business models of tomorrow. This means that the systems created at present must be able to accommodate new ways of bundling, usage models or tiers in the future.

“Everything comes back to flexibility,” explains Sean. “You need flexibility in the way that you sell and the way that you monetize when you bring products to market. The only way to really achieve that flexibility is to design a technology stack that is united across Sales, Finance and Operations.”

“The big advice from my side is don’t hold back,” adds Andreas. “It’s important to build a flexible and adaptable solution from the beginning, so that your business can shift and change according to the demand that you will experience from customers.”

3. Take an end-to-end approach.

In order to have a flexible foundation from which to build and launch future business models, companies also need to take a holistic view of their lead-to-revenue architecture. One aspect of this process that is commonly overlooked is unifying the Sales and Finance team.

“In a traditional model it’s really common to think of Sales and Finance as two distinct, even standalone, business functions,” says Sean. “But in order to successfully deploy a recurring revenue model or usage-based model, it’s crucial to unify these functions. If the business wants to sell in a flexible way, then it also needs to be able to bill, account and recognize that revenue.”

To that end, the panelists offered the following advice to ensure a more comprehensive approach:

  • Bring Sales and Finance teams together at the outset to plan, build and operate a unified lead-to-revenue architecture that is capable of handling existing requirements and supporting future needs.
  • Develop a comprehensive and holistic data strategy that considers usage data across all applications.
  • Engage a partner that understands the full lead-to-revenue process, as well as the vendor and technology landscape.

To learn more about how your organization can enable usage-based models, watch the session here. Have specific questions about creating a unified lead-to-revenue architecture? Contact us.

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