Usage-based pricing models: making the switch

Smart devices and the rise of the Internet of Things have created a completely new ecosystem. While basically everything can be measured nowadays, we can now put triggers to anything. This gives room to shifting client behaviors, it is no longer necessary to own a device to use it. We’ve already seen quite some examples in transportation (cars, steps, scooters and e-bikes). But more and more sectors are discovering the possibilities of usage-based pricing.

Long term examples such as power by the hour from Rolls Royce jet engines or Xerox offering a pay per print proposition have been around for a while. But emerging product as a service propositions and asset as a service examples are gaining ground. We see the highest adaption of new models in business-to-business propositions. Surprising? Not at all. We’ve seen that high investment assets are profiting most from these new pricing models. We also see a shift from capital expenses to operating expenses - which means you can start and run a business with less investment than before.

FINN Washer & Dryer Illustration

Three examples of usage-based pricing models

Subscription models

We all know subscription services, for meal boxes and razor blades for instance. The customers pay a monthly fee for a recurring service. But new are the ones based on data of actual usage. Ordering and paying for a replacement only when you actually need it.

FINN & Sijperda infographic

Product as a service

Selling your product as a service instead of just the product. Ownership stays with the manufacturer, but you charge a fixed fee for clients using the product or for their actual usage. For a manufacturer this means a shift from short term high income to long-term low income per product. But in the end, you are able to make a higher profit per product. Also, product as a service is great for sustainability goals: re-using the products in the production cycle.

FINN & Olivery infographic

Asset as a service

Is basically the same as product as a service, but more b2b focused and related to high investment products. With the 4th industrial revolution in full swing asset management becomes smarter and is shifting to asset as a service-propositions. Complete factory lines are delivered as a service and charged on a pay per use basis. But also, medical equipment such as CT scans are already operated on a pay per use model. Shifting service and downtime risks to manufacturers improves profit and productivity with producers by only paying for uptime. Manufacturers can increase their market by lowering the entry point for usage.

Usage based pricing models are mostly one of the examples above or a combination of pay per use and a fixed fee. Shifting to usage-based pricing has some very clear advantages:

  • Reaching new audiences and creating bigger markets
  • Increasing value perception, loyalty and recurring revenue
  • Future proof your company

Enabling these kinds of business models lead to a shift in ownership: from client to manufacturer. Selling products or assets a a service also means shifted responsibility for service, maintenance and insurance. With the help of sensors and IoT, maintenance is managed better and therefore better predicted. This helps to avoid downtime and increases profitability and productivity. Also the financing needs for ownership shift to manufacturers which makes it easier to operate a business. Finally, usage-based business models are good news for sustainability goals as the product ownership stays with the manufacturers - who can reuse it to make it circular.

  • Increased profitability and productivity
  • Decreased financing needs to operate a business
  • Adding to sustainability goals

Innovate your business!

Yes, we’ve got the infrastructure and the software, but above all we know how to boost your business with IoT payments. We’ve got:

Experience in every sector
Tech leads on speed-dial
An instant integratable IoT payment toolkit

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