The A-Z of total monetization: terms every finance leader should know
The language of revenue is changing.
For decades, business models were static. You sold a product, sent an invoice, and recognized the revenue. Today, the subscription economy has evolved into something far more dynamic. Companies are shifting from simple recurring fees to complex, hybrid models that blend subscriptions, usage-based consumption, and one-time charges.
To navigate this shift, finance and strategy leaders must master a new vocabulary. This glossary provides the standard, industry-accepted definitions for the terms shaping the modern monetization landscape, from AI tokens and hybrid pricing to revenue recognition and churn mitigation.
1. Pricing & packaging models
Modern monetization is not about picking one model; it is about finding the right mix of models that work for your business. These terms define how value is packaged, priced, and sold in the usage economy.
Usage-based pricing (UBP)
Also known as consumption-based pricing, this is a monetization strategy where customers are charged based on their actual consumption of a product or service (e.g., gigabytes stored, API calls made, miles driven). Unlike flat subscriptions, UBP aligns cost directly with value.
Read the full definition: Usage-based pricing
Hybrid monetization
A pricing strategy that combines multiple charge models, typically a recurring subscription fee (for access) plus a usage-based fee (for consumption), into a single offering. This model is increasingly considered a best-practice approach for SaaS and IoT, as it balances recurring revenue predictability with the upside growth of consumption.
Read the full definition: Hybrid monetization [Link to New Asset 4]
AI monetization
The strategies used to generate revenue from Artificial Intelligence products, specifically through the metering of generative units like tokens, characters, or compute time. At scale, AI monetization typically relies on specialized mediation engines to track high-volume, milli-cent events.
Read the full definition: AI monetization
Value-based pricing
A strategy where prices are set primarily on the perceived or estimated value of the product to the customer, rather than on the cost of the product or historical prices. In modern SaaS, value-based pricing can include models such as outcome-based pricing, where fees are tied to measurable business results.
Read the full definition: Value-based pricing
Attribute-based pricing
A dynamic pricing method where the cost is determined by specific characteristics (attributes) of the usage event, such as time of day, region, or speed. This allows for highly granular price books without managing thousands of individual SKUs.
2. Revenue & compliance
As pricing models become more flexible, financial compliance becomes more rigid. These terms define the standards for recognizing and reporting revenue in a complex world.
Revenue recognition (Rev rec)
The accounting principle that determines the specific conditions under which revenue is recognized or accounted for. In subscription and usage models, revenue is often recognized ratably over the service period, not necessarily when the cash is collected.
Read the full definition: Revenue recognition
ASC 606 / IFRS 15
The unified revenue recognition standards governing how companies that report under US GAAP or IFRS recognize revenue from contracts with customers. It requires companies to recognize revenue when control is transferred, often creating complex obligations for hybrid bundles and variable usage considerations.
Read the full definition: SaaS Revenue recognition
Annual recurring revenue (ARR)
A key metric used by subscription businesses to measure the predictable and recurring revenue components of their term subscriptions, normalized to a one-year period. It excludes one-time fees and variable usage that is not committed.
Read the full definition: Annual recurring revenue (ARR)
Net revenue retention (NRR)
A metric that measures the percentage of recurring revenue retained from existing customers over a specific period, including expansion revenue (upsells/cross-sells) minus churn. It is a critical indicator of the health of a hybrid business model.
3. Billing & operations
Implementing a hybrid strategy requires moving beyond simple invoicing. These terms define the systems and processes that power the order-to-cash lifecycle.
Dunning management
The automated process of communicating with customers to collect accounts receivable, specifically regarding failed payments or declined credit cards. Modern dunning uses “smart retries” and logic to recover revenue without increasing involuntary churn.
Read the full definition: Dunning management
Order-to-cash (O2C)
The entirety of a company’s order processing system, from the moment an order is placed to when the cash is collected, and the entry is logged in the general ledger. In modern businesses, O2C must handle complex amendments, renewals, and usage ratings.
Read the full definition: Order-to-cash (O2C)
Quote-to-cash (Q2C)
An expanded view of O2C that begins with the configuration of the quote (CPQ). It covers the end-to-end process of configuring offers, pricing, quoting, contracting, billing, and collecting cash.
Read the full definition: Quote-to-cash (Q2C)
IoT Billing
A specialized subset of billing that handles the monetization of Internet of Things devices. It typically involves bundling hardware (one-time), software (subscription), and device telemetry (usage) onto a single invoice.
4. The complete index
Use this index to navigate the complete library of monetization terms.
- AI monetization
- Annual recurring revenue (ARR)
- Attribute-based pricing
- Deal desk
- Dunning management
- Hybrid monetization
- IoT billing
- Monthly recurring revenue (MRR)
- Net revenue retention (NRR)
- Order-to-cash (O2C)
- Pricing strategies
- Quote-to-cash (Q2C)
- Recurring billing
- Revenue recognition
- Subscriber churn
- Subscription business model
- Usage-based billing
- Value-based pricing