Over the past 15 years, we’ve worked with some of the best companies in the world. When it comes to consumption, we’ve seen what works, what the pitfalls can be, and where gaps in the market currently exist.
At our recent Subscribed Live event, Zuora CEO Tien Tzuo and I delved into what consumption pricing is, what happens when it goes wrong, and how Zuora is innovating to help companies quickly and easily adopt consumption pricing models.
Businesses and consumers love the idea of consumption pricing, but very few companies have really nailed the execution – the approach is too often piece-mealed. We took a holistic approach with Zuora for Consumption, giving finance teams the right billing and revenue automation tools, customers the transparency and flexibility to consume what they want, and product owners the right pricing and mediation tools to pivot from pure pay-as-you go to hybrid models – and everything in between.
Keep reading for the top 3 reasons that Zuora for Consumption is the complete package.
Some companies spend years setting up consumption pricing – they choose a pricing model, pivot their product strategy, change their entire go-to-market structure, and finally launch. Only to then discover that they got it wrong, right out of the gate. And now they’re stuck with a pricing model that’s all wrong for their business and customers and it’s going to take another year to iterate and pivot their consumption model to something different.
Zuora for Consumption features a native Mediation Engine and Consumption Pricing Designer, making it easy to craft a consumption pricing model to fit your needs right out of the box.
The more attributes you have to base your pricing on, the more you can create the perfect offering for your customers. And with drag and drop capabilities, our Mediation Engine turns what would otherwise be a very complex process, into something really easy to manage.
“We’ve highly leveraged the Zuora product catalog and easily extended it to set up different tiers, features, and consumption pricing models for our customers. Whether it’s offering new services or updating existing ones, we can update the catalog quickly without developer overhead. If we’re seeing higher customer demand in a certain market, we can quickly adjust prices to meet market demand.”
– Chaz Adams, Product Manager, Flexcar
Zuora customer update: What’s new in Zuora
Surprises lead to terrible customer experiences. The nature of consumption pricing means that customers might not realize how much they’re using. We’ve all done it — you hit your phone data limits on the 5th day of the month, or your Wi-Fi on the plane runs out after just 45 minutes. Now you have to pay more and you wonder why this couldn’t have been prevented?
The answer is transparency – customers need to stay apprised of their consumption patterns. And if you can do it right, it’s not only a better experience, but can be a key growth lever as well. Customers like to see what they’re paying for, what they’ve used, and what their usage patterns are. Zuora’s Real-Time Rating Engine and Consumption APIs make this possible.
“With Zuora, we’ve implemented consumption in a variety of ways that provide immediate value, increasing flexibility for our customers while making revenue more predictable. By powering these models, Zuora is a critical partner that is helping us achieve stronger retention and faster growth.”
– Moshe Sarusi, Director of Finance Operations and Global Billing, Yotpo
Hear from a customer: Yotpo
Giving customers the option to upgrade their plan mid-cycle is ultimately a win for both the customer and the business. But what does it mean for finance teams? Finance often has an aversion to consumption based pricing, because it introduces a whole host of new variables and revenue accounting is already extremely complicated as it is. Since consumption pricing is dependent on how customers consume the product, there’s a lot more dependency on data from the product team. Getting it wrong means failed audits and misstated revenue. The risks are high.
Zuora Revenue allows finance teams to automate and scale their operations to support consumption pricing models.
The benefits of consumption based pricing are significant and the effort to get there requires an enterprise-wide focus on understanding and driving customer value. Coordinating capabilities around metering, iteration, automation, and engagement are the ingredients to creating a winning value proposition that will drive more growth, less churn, and greater lifetime value.
We’ve already made Zuora for Consumption available – we released charge models like Prepaid Credits, the Real-Time Rating Engine, and Consumption Revenue back in January. We will be adding new capabilities such as the Formula Pricing and the Mediation Engine in a few months. All of this gives your product managers flexibility, customers visibility into what they are consuming, and your finance team what they need to be fully empowered.
Learn more about how Zuora for Consumption makes all of this possible.
1 Mediation Engine and Formula Pricing will be available in late 2023.