Consumption-based pricing sounds easy—you just bill customers for the amount of your product or service they use, right? In reality, consumption models introduce a whole set of challenges and questions:
- How do you find the right consumption model?
- How do you turn raw usage into billing?
- How can you show customers how much has been consumed to increase visibility and earn their trust?
- How do you deal with accounting complexities and the inherent unpredictability of usage?
Earlier this year, we unveiled Zuora for Consumption, a holistic solution for companies doing consumption-based pricing. And at our recent Subscribed Connect event in London, Zuora CEO Tien Tzuo and I took it a step further, demonstrating the latest innovations to streamline the launch of a consumption-based model and maximize the potential of this strategy for your business.
Using the example of an electric bike rental company launching a consumption-based pricing strategy, we showed—in real-time—how you can use Zuora’s Mediation Engine to create flexible meters, consolidate usage data, and reveal new customer insights.
Watch the video below and keep reading to learn how Zuora’s Mediation Engine enables rapid experimentation with pricing, better alignment with customer value, increased visibility, and added predictability.
Zuora’s Mediation Engine
- Ability to ingest raw usage data at 200k events per second
- Out-of-the-box metering components to aggregate, enrich and transform event data through a drag-and-drop user interface (UI)
- Ability to apply custom, proprietary logic to meters
- Auditable usage recording tracking throughout rating, billing, and revenue recognition
Ingest raw usage data at 200K events per second
A big hurdle that companies run into when they want to do consumption is—how to handle the data. They need to be 100% confident in the consumption data they bill customers on and recognize revenue for, but it’s really really hard to actually get that data into a consistent, billable format.
We often hear from our customers that, while they are able to successfully map out their ideal pricing strategy using Zuora’s Consumption Pricing Designer, they’re struggling with turning raw usage into billing. What they need are flexible meters to track usage.
Image: Without a mediation tool, companies struggle to turn raw usage data into data that can be accurately rated, billed for, and recognized.
The reality for these companies sounds a little something like this—product data is coming from multiple sources, they have several different systems that usage data is spread across, and is ultimately ending up routed throughout data warehouses, CSV exports, or their usage analytics tools.
They’re then passing dozens of spreadsheets over to their billing teams to try to apply pricing towards. Most customers we work with are attempting to hack together something between their different systems, when what they really need is a solution called Mediation.
Image: With a mediation engine, usage data is ingested, transformed, and metered so it can be accurately rated, billed for, and recognized.
Mediation is the process of ingesting raw usage data, transforming it, and making sense of the data for a billing system. And Zuora’s Mediation Engine can do this at scale, ingesting upwards of 200K raw usage events per second with ambitions to scale to over 1 billion events per day.
That data is then your source of truth for applying a rate determined by your pricing plan, billing your customer, and recognizing revenue. While some billing engines have a batch-based rating engine, which will rate usage against a pricing plan every day or every week, we’ve built Zuora with a near real-time rating engine so that you can see pricing immediately as consumption comes in. This is a critical part of consumption since you want to make sure you are able to measure your customer’s usage in an accurate, timely, and efficient manner.
“Recent IDC research found that while 42% of companies already have a consumption billing solution, it is inadequate for their future needs.The new Mediation Engine in Zuora for Consumption enables customers to easily import, clean, and transform high-volume, raw consumption data so that consumption can be flexibly rated for any type of pricing scheme with a drag and drop interface.”
– Mark Thomason, Research Director for Digital Business Models and Monetization at IDC
Out-of-the-box metering and a drag-and-drop UI
After you consolidate all of your usage data, you then need to create flexible meters. What are meters? These are the measures of your customers’ usage—like your gas meter, miles spent, or GB used. Meters are then fed into a rating engine so that you can apply prices to every metered event.
For our fictional electric bike rental company, these meters might look like:
- The number of bikes rented per day.
- The charge level of the electric bikes in kWh
- AI support tokens for support tickets
- Tire wear across the bikes
- Number of miles driven
Image: Zuora Billing Mediation dashboard showing meter names, statuses, types, ingestion totals, errors, and actions.
Other common meters might include GB, API calls, or AI tokens, depending on the type of service you offer.
Instead of charging customers a flat rate per day, you can use multiple meters to give customers flexible pricing options, like prepaid with drawdown. With more scalable pricing options, customers can try out new products with less risk, and you can drive a recurring growth flywheel.
And with drag and drop capabilities, our Mediation Engine turns what would otherwise be a very complex process, into something very easy to manage.
Image: Zuora Billing Custom Meter Stream drag-and-drop capabilities.
Image: Zuora Billing Custom Meter Stream drag-and-drop capabilities with drop-down menu.
Apply custom, proprietary logic to meters
Companies that are just getting started might only have a few meters, but mature ones have dozens or hundreds of different metrics they’re tracking across all their products and services. So, by consolidating usage meters into one place, product teams can also analyze and draw insights into how their customers are getting value out of their product, then easily add, adjust, and iterate on new meters, ultimately turning raw usage into data you can bill for and recognize.
“Constantly evolving industry trends mean we are always thinking about our pricing, how we present offers, and the data points we want to collect and make decisions on. More than 90% of leading companies in 12 industrial sectors rely on AVEVA’s software solutions to help them design, build, operate, and optimize their plants and facilities. Adding Zuora for Consumption within our AVEVA CONNECT platform will give our customers critical visibility into their consumption habits, allowing us to provide transparency and deliver value as we iterate over time. Zuora’s unique, end-to-end solution also helps us simplify the complex revenue recognition and compliance involved in consumption monetization.”
– Kevin Cornwall, CIO at AVEVA
Track data for greater customer and internal visibility
Surprises lead to terrible customer experiences. Customers value real-time consumption visibility, enabling them to track daily progress, anticipate overages, and view their billing charges. The ability to push out threshold notifications allows customers to monitor their spend and increases overall customer satisfaction. And usage forecasting can enable businesses to monitor behavior and predict expansion opportunities for customers with high consumption.
That’s exactly why we’ve built real-time visibility directly into Zuora’s Mediation Engine, and made it available so that end customers can see it too.
Image: Real-time end customer usage and threshold visibility.
- Price and unlock pricing flexibility for consumption models with our Consumption Pricing Designer
- Meter so that you have one place to capture and consolidate all consumption data at scale leveraging our native Mediation Engine
- Inform customers on consumption behaviors immediately through our APIs and near real time rating engine
- Recognize revenue for dynamically changing consumption charges with continuous revenue automation
“With its new Mediation Engine and the ability to monetize consumption, subscription and one-time transactions together, Zuora is providing the revenue platform of tomorrow and powering businesses with complex consumption-based models.”
–Stephen Hurrell, Vice President and Research Director in the Office of Revenue at Ventana Research
Zuora’s Mediation Engine is available today, and the best part is—it’s native and built-in to Zuora for Consumption with no additional cost. Every consumption business needs metering, so we will be including the Mediation Engine for every customer that already has Zuora for Consumption.
To explore the potential growth your business could see with consumption-based pricing, talk to one of our experts.