There are two main ways to go when pricing a subscription product or service: quantity-based pricing vs usage-based billing. Both have benefits and drawbacks, and it can be tough to decide which is right for your business.
In this article, we’ll discuss the differences between quantity-based pricing and usage-based billing and help you figure out which is best for you.
What is Quantity-based Pricing?
With quantity-based pricing, businesses charge their customers based on the number of goods or services they consume. This is often seen in subscription boxes, where the customer pays a fixed monthly price and receives a certain number of items.
Quantity-based pricing is straightforward to understand. Customers know exactly how much they’ll be paying every month, and businesses can predict their revenue accurately.
However, quantity-based pricing can sometimes lead to customers feeling like they’re not getting their money’s worth if they don’t use all of the items in their subscription box.
What is Usage-based Billing?
With usage-based billing, businesses charge their customers based on how much they use their service. This is common with cloud-based software, where customers are only charged for the features or storage space they use.
Usage-based billing can be more complex to set up than quantity-based pricing, but it has the advantage of being more flexible for customers. They only pay for what they use, so they don’t feel like they’re wasting money on a service they don’t need.
Difference Between Quantity-based Pricing and Usage-based Billing
The main difference between quantity-based and usage-based billing is that, with quantity-based pricing, customers pay a fixed price for a set amount of goods or services, while with usage-based billing, they pay for only the amount of goods or services they use.
Quantity-based pricing is usually simpler and easy to understand, while usage-based billing can be more complicated but more flexible simultaneously.
When To Use Quantity-Based Pricing
Quantity-based pricing is a good option when:
- You have a product or service that customers are likely to use all of
- You want to keep your pricing simple
- You want to be able to predict your revenue with a high degree of accuracy
- You have a subscription service with a low monthly price
- You have a subscription service with a high number of items
When To Use Usage-Based Billing
Usage-based billing is a good option when:
- Your customers are likely to use only some of your products or service
- You want more flexible pricing for your customers
- You’re selling a cloud-based software with different features
- You’re selling a subscription service with a high monthly price
- You want to avoid customers feeling like they’re wasting money
Which One is Right for You?
Usage-based billing vs quantity-based pricing, both are valid options for subscription businesses. It just depends on what you’re selling and what your customers want.
If you’re still not sure which one is right for you, try experimenting with different pricing models and see what works best for your business. And remember, you can always change your pricing in the future if you need to.
Can You Use Both?
Yes, it’s possible to use both quantity-based pricing and usage-based billing within the same subscription business. For example, you could have a subscription box that charges a fixed monthly price but also offers the option to add on additional items for an additional fee.
Or you could have cloud-based software with a usage-based pricing model but also offer discounts for customers who prepay for a certain amount of storage space or features. The possibilities are far and wide!
The important thing is to experiment and find what works best for your business and your customers. Unfortunately, there is no one-size-fits-all solution when it comes to pricing, so don’t be afraid to try something new.
Why Use ReliaBills?
Whichever pricing model you choose, you will need an invoicing and payment processing platform to manage your subscription payments. And that’s where ReliaBills comes in!
ReliaBills is an all-in-one invoicing and payment processing platform that makes it easy to manage your subscription payments, regardless of how you price your products or services. With our platform, you can:
- Create customized invoices
- Automate your billing process
- Send invoices and receipts automatically
- Accept payments online
- Offer discounts and coupons
- And much more!
You can also structure your payment plans however you want, so whether you use quantity-based pricing or usage-based billing (or both!), we can help you easily manage your subscription payments.
If you’re ready to try ReliaBills, sign up for free now! The base plan allows you to access basic invoicing and payment processing features like recurring billing. But if you want even more features like automatic failed payment recovery, you’ll need to upgrade your ReliaBIlls account to ReliaBills PLUS—our premium version.
At only $24.95 per month, it’s a small price to pay for ultimate peace of mind! Subscribe now! Or you can click here to learn more about it. With ReliaBills, you’ll be able to manage your subscription payments easily, so you can focus on running your business. Get started today!
Deciding which pricing model to use for your subscription business can be difficult. But with a little introduction coupled with some trial and error, you’ll be able to find the right solution for your business. And with ReliaBills, you can incorporate whatever billing model you choose.