A Guide to Implementing Usage-Based Pricing to Boost E-Commerce Sales

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In today’s business landscape, securing customers’ loyalty goes beyond offering innovative products and services. As a previous post entitled ‘The Rise of Omnichannel Retail’ illustrates, businesses must also adapt to consumers’ changing needs to empower them and deliver an optimized experience. In the retail industry, this can involve going omnichannel to unify the customer’s shopping journey across brick-and-mortar stores, mobile applications, social media, and more.

Beyond offering convenience and consistency through omnichannel retail, e-commerce businesses can also review their pricing models and ensure they align with customers’ purchasing behaviors. In light of new technology like artificial intelligence, usage-based pricing is a model online business owners can consider. Below, we highlight why it’s beneficial for e-commerce and how it can be implemented for increased sales and growth.

How usage-based pricing can boost sales

Compared to conventional pricing models, where customers pay based on the fixed price of a product or service, a usage-based pricing strategy charges customers only for what they consume. In other words, customers can get themselves a service according to their specific needs without having to buy everything upfront.

A notable example of an e-commerce company leveraging the power of consumption-based pricing is Amazon Web Services (AWS). As explained by an AWS spokesperson, this pricing strategy eliminates the need for customers to pay additional costs for ownership and updates, which is especially important for software-as-a-service businesses looking to optimize their resources.

On the business side, a usage-based model can also contribute to better revenue and customer retention rates. Since customers only pay for what they need when they need it, they do not have to deal with idle resources and are given more freedom and flexibility over their spending — ultimately boosting their satisfaction with the service. 

It is worth noting that such benefits can only be realized if online businesses build their capabilities and invest in the areas discussed in the following section.

How e-commerce businesses can implement usage-based pricing

Bill customers accurately

Successful deployment of usage-based pricing depends on your ability to bill customers accurately based on the service they need and consume. Since this can be hard to track via manual processes, Softrax’s consumption billing software is a reliable digital tool for handling simple to complex billing scenarios and easily monitoring usage levels, including minimums, overages, and tiered packages.

Since the software organizes the billing details according to the contract renewal date, transaction accumulation, and specific models like aggregate and cumulative pricing, it can prevent revenue loss or leakage regardless of the size and scale of your business. It also allows easy data capture for regulatory compliance and automated updates across the system for operational efficiency.

Track competitors’ pricing

Another way to ensure success in consumption-based pricing is to consider how your competitors charge their respective clients. You will want to stay differentiated while still ensuring your chosen pricing model is acceptable within the market, whether you offer SaaS or lie within the niche of business-to-business (B2B) e-commerce.

In this light, you can utilize pricing optimization software like Prisync for smart data-driven pricing. Specifically, Prisync leverages AI to collect business and consumer data and thus predict future outcomes more accurately based on changing market conditions and purchasing behaviors.

Invest in customer relationship management

Lastly, e-commerce businesses must also be equipped to invest in customer relationship management (CRM) to ensure that their consumption value metric and tracking mechanisms are predictable on both business and consumer ends. Common metrics like the amount of data consumed must be measurable and controllable to keep delivering value to customers. 

Like billing scenarios and competitor analysis, CRM can be handled with the help of digital platforms that connect with customers across multiple channels, receive feedback, and consolidate their insights to capture new revenue streams and make more informed business decisions. Ultimately, growing your sales and customer reach through usage-based pricing relies on the strategic use of digital tools at your disposal.

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About the author

I have always been a shopaholic. A lot of times my questions went unanswered when it came to retail questions, so I started Talk Radio News. - Caitlyn Johnson

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