The three benefits of transparent billing practices
Have you ever really taken a look at your electric bill? Not just glanced at the total, but actually stopped to read the whole thing? While nobody loves looking at bills, it can’t hurt to know exactly where your kilowatt hours are going.
We recently decided to give our own electric bill a closer study. Here in San Francisco, that means opening up our Pacific Gas and Electric Company (PG&E) statement. We expected a mostly-boring read, but the longer we looked, the more impressed we were.
These “boring” bills hit the trifecta of usability: they’re digestible, detailed, and dynamic.
What did this legacy utility bill contain that inspired admiration in us? In a word: transparency.
A typical PG&E bill contains an impressive amount of information. It starts off with a summary of your energy usage and your final bill, then drills down to the exact kilowatt hours you used and when. Each statement contains a graph showing usage by day, plus one summarizing your monthly billing history. It even includes a helpful glossary of terms.
If you crank up the AC, you get charged more. If you avoid peak hours, you save money. Your bill reflects true usage, not an average or fixed amount. These “boring” bills hit the trifecta of usability: they’re digestible, detailed, and dynamic.
Now, think about your latest software bill. Most likely, you have a couple of SaaS subscriptions. Are those invoices anywhere near as detailed? Are they actually transparent?
What tech and software companies can learn from utilities
At their core, utility providers like PG&E are similar to other, more “modern” businesses. They want to meet their customers’ needs, solve their problems, and offer excellent service. Providing transparent billing helps them do all three.
Using the detailed information in their electricity bills, PG&E’s consumers can make data-driven decisions around their own energy use. For example, they might save money by:
- Avoiding peak pricing periods
- Changing their behavior to reduce energy consumption
- Identifying usage trends and correlating them to specific behaviors
- Comparing their usage to the “norm” or “average” and adjusting as necessary
The end result is something all of us want: a smaller bill.
Consumers of SaaS products are also looking to get the most bang for their buck. They want to avoid high-cost events, optimize their usage, and recognize trends. However, they often don’t receive the information they need to do so, especially if the service is priced on a seat-based or flat fee model. That’s why switching to transparent billing practices, like those exemplified by utility companies, can be such a huge differentiator for software providers.
Benefits of transparent billing practices
So, what might “transparent billing” mean for a software company? One increasingly-common option is usage-based billing. As the name implies, customers are charged based on what they use (data, storage, events, etc.) rather than by seats, licenses, or monthly fees.
Those software companies that leverage usage-based pricing (and other transparent billing practices) don’t just stand out from the competition. They also provide their users with three critical benefits that have the added effect of boosting loyalty and brand image. Let’s go through each in more detail.
Billing is mission-critical for every business, so customers want to make sure it’s being handled correctly, every time. By basing billing on real-time usage data, every cost is accounted for – and visible to the customer. This is true even in the most complex pricing situations, reducing the risk of potentially costly errors.
Accurate, detailed invoices also promote brand trust. Users know exactly what they’re getting for their money, making your product’s value to their business both clear and measurable. There’s no fuzzy ROI calculation: the proof is in the data. When contract renewal time comes around, your customers will be ready to sign, boosting your retention rates and driving positive outcomes for your business. Maybe they’ll even refer a friend.
2. Fewer support issues
If you’ve ever had to deal with an unexpected bill, you know how frustrating it can be. If the bill is particularly large, the emotion might be closer to panic.
Customers that suddenly see a costlier-than-expected line item on their invoice experience these feelings as well. And if they think the charge was made in error, they’ll be sure to let you know. How many support tickets have you received this quarter asking about this cost or that cost, or questioning X or Y charge? Each of those messages needs to be reviewed, addressed, and responded to, taking up your team’s valuable time.
With transparent pricing, however, every charge is clearly outlined in the invoice, reducing the number of annoyed support tickets you’re likely to receive. Your CS and finance teams will be freed up to focus on more pressing issues, and your customers (and you!) will have greater peace of mind.
3. Predictive capabilities
Usage-based billing gives customers far more information than traditional invoicing, and that data can then be used to predict future costs, recognize trends, and pinpoint outliers. This type of billing allows for a greater degree of optimization and more levers to pull when looking to reduce costs. With access to granular usage data, teams can better predict ups and downs with regard to costs and plan accordingly, saving them from sudden shortfalls.
In today’s data-based software environment, iteration is the name of the game. Transparent, usage-based billing offers customers the opportunity to experiment with their own pricing structure and understand how those adjustments will effect their overall costs.
A better way to bill
When it comes to billing, the more information you can provide, the better. By offering full transparency around costs and charges, you’ll foster brand loyalty, build trust, and encourage long-term partnerships. You’ll also be giving your customers the data they need to make their own business decisions. And that’s something they’ll appreciate no matter what stage of growth they’re in.
To learn more about how Orb can support your usage-based billing model, schedule a demo.