Once you have a consumption-based pricing strategy in place, a thoughtful — and thorough — implementation plan is the next step. According to Kanazawa, there are four critical areas to focus on to ensure a smooth transition:
- Products and solutions. Products need to include built-in telemetry so they can funnel usage data to the cloud for analysis.
- Customer engagement. Ongoing engagement based on usage data and triggered by customer actions and experiences must build a relationship throughout the customer lifecycle.
- Marketing, sales, and channels. Usage data can also be used to inform no-touch upsell and cross-sell pushes without a salesperson or manual intervention.
- Operations, finance, and IT. Operational and financial processes must be designed to scale and supported by a flexible tech stack.
To move to consumption-based pricing, companies must uplevel their metering capabilities so they can learn, iterate, track, and bill for usage of products and features — not simply collect customer data. Companies often acquire other companies with consumption-based pricing models but aren’t able to scale them successfully because their core operations aren’t configured to store and utilize telemetry data. That results in data and intelligence that aren’t being stored or acted on anywhere in the company, stunting the growth potential of these businesses.
Companies also need to transform multiple aspects of the business, including core finance and IT systems, or consumption-based pricing won’t be scalable. Customers increasingly expect to have self-service options that allow them to see where they are in their consumption and turn certain parts of the subscription on and off to avoid surprise bills.
As Kanazawa puts it, the challenge today is no longer strategy — it’s getting the systems and operations in place. The key to success is to take small steps with scalability in mind, maintaining an expansive vision of what subscriptions and consumption-based pricing mean to the marketplace and customers.
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.