SaaS Subscription Model Options in 2022

Jessica Wade

Subscription billing is itself a revenue-generating business model, however, the billing model is the spirit of subscription-based businesses. Companies that are operating in this industry opt for varying billing models that diversify the revenue stream. The billing model is directly linked with your recurring payments and revenue.

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There are different billing models from which you can adopt the one that you think can help you generate more revenue including:

  • Flat fee billing model
  • One-time charge model
  • Metered billing model
  • Usage-based billing model
  • Hybrid billing model

Which Billing Model for Your SaaS Business

Flat Fee Billing Model

If you are new in the SaaS subscription business market or if you are an entrepreneur, then the best billing model for your business is the flat fee. It is the easiest billing model for customers to understand. Also, it is easiest to implement. By opting for this model, you charge a fixed rate for the subscription plan to the customer for a specific time (till the subscription lifecycle ends). The flat-rate billing is easier for the customer is easy for SaaS customers because it is similar to the one-time purchase that people frequently do in the real world. So, if you are new in the market, you can go for billing on a flat fee basis.

One-Time Charge Model

SaaS businesses need to opt for a one-time charge because they target to cater to customers from all dimensions. There are customers who need certain subscriptions just once. For instance, magazines offer subscriptions, but they do not let go of their one-time buyers. They sell the specific journal that the customer needs. So, if you need to cater to even one-time buyers, then keep the one-time charge part of your plan.

Metered Billing Model

The B2B SaaS business industry is not a simple one rather things are arcane even for retailers. Here, most of businesses are working on the B2B model. Even one business is linking and doing business with multiple businesses so where the end customer comes, it is difficult to comprehend. Metered billing is for those SaaS businesses that cannot offer a flat fee for their product or services.

They prefer dividing their SaaS platform into units. Then these units are monetized to generate revenue. Today, SaaS customers demand maximum usability. More is the usability, more will be customer satisfaction. And to offer better usability, metered billing is the right billing model for you. It bills customers for what exactly they have used.

Here, the customer data is also tracked to have a better understanding of customer behavior. The insights into the customer journey show you what to sell and whom to sell. These insights keep you aware of what is happening in your SaaS business. Make futuristic business decisions by opting for this business model.

Usage-Based Billing Model

Many people confuse metered billing with the usage-based billing model. Usage-based billing is typically a billing model where you charge the customer as per his usage. For instance, the best way to charge people for energy consumption is to charge them as per their usage. So, the billing model not only depends on the business but also on the commodity that you sell.

Hybrid Billing Model

Last but not least, the hybrid billing model is also popular in the subscription business market. Many SaaS businesses that target to maximize their recurring revenue, opt for this billing model. In this billing model, you do not opt for a single billing model rather you go for a mix of billing models. For instance, some SaaS businesses offer a flat rate for their SaaS platform, but they also charge a fee for their services on a monthly, weekly or yearly basis depending on the business. That’s how they diversify their recurring revenue.

Which Billing Model for Your SaaS Business

Now that you know the billing models that SaaS businesses go for, it is time to decide the billing model for your business. The first thing to understand regarding the billing model is that it is not necessary that one billing model keep generating the same revenue for the business in the long run. You will need to keep improvising the pricing plan and billing model to be competitive in the market. The billing model that you choose will depend on:

  • The nature of your business
  • Age of your SaaS business
  • Your customer base

The billing model also depends on the customer base. How? As it has been mentioned that a flat fee is suitable for startups and entrepreneurs because it is easy to understand for small businesses. The billing model will also depend on the age of the business. As the age of the business increases, you keep trying the billing models and eventually, businesses end up with the hybrid billing model.

Conclusion

Now, you know about all the billing models in the SaaS subscription business market. It is hoped that you will end up putting your hand on the right billing model for your SaaS business. Whether it is a flat fee billing model or a usage-based model, your point of focus is the revenue. Only the hit and trial method will help you have the revenue-generating billing model for your SaaS business.

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I work with SaaS, Tech and established E-commerce companies to help create and execute a content marketing strategy built around your goals and ROI.

Anchorage, AK
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