Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.
Archive Archive

More Small Businesses Switch to Pay-As-You-Go Pricing

The switch is designed to reduce customer churn and increase revenues . / Credit: Parking meter image via Shutterstock

Flat-fee pricing may be taking the first steps toward joining the belief that the earth is flat in the dustbins of history.  A growing number of small- to medium-size businesses (SMBs) are forgoing a traditional pricing model in favor of a pay-as-you-go billing model known as activity-based pricing, a new survey shows. The switch is designed to reduce customer churn and increase revenues.

Activity-based billing is where a business charges a fee based on how customers use a product or service, as opposed to a flat subscription price. According to a survey of more than 400 SMBs, nearly 28 percent of them said they currently use activity-based billing models to bill their customers. And nearly half of those not yet using activity-based pricing (49 percent) said their companies have considered or are planning to switch. The survey was conducted by iGR, a market research consultancy focused on the wireless and mobile industry.

Many of the companies have made the switch to support high rates of growth in their customer bases and/or revenues, the survey found.

They also feel that activity-based pricing gives them an effective defense against increasing competition from traditional providers. It is this competition that generally initiates the decision to move to activity-based billing and thereby provide some differentiation in the marketplace, the survey found.

Activity-based pricing also gives them a tool to actively evolve and futureproof their businesses.

In addition to showing interest in transitioning to an activity-based milling model, SMBs are also becoming more comfortable buying services and products from vendors that use a similar model, the survey found.

"Such findings indicate an opportunity for firms offering activity-based billing services, as many of the companies iGR surveyed are considering or planning to implement such a model in their firm," said Iain Gillott, president and founder of iGR. "Companies assessing their own business models and supporting systems should certainly consider activity-based billing. With the right tools and an accessible solution—perhaps in a cloud-based environment –an SMB could experience greater flexibility, accuracy and reliability in how they track accounts."

Business News Daily Editor

Business News Daily was founded in 2010 as a resource for small business owners at all stages of their entrepreneurial journey. Our site is focused exclusively on giving small business advice, tutorials and insider insights. Business News Daily is owned by