Adding consumption-based pricing has shown to increase revenue growth. Many companies consider it but aren't sure when and how to implement the change. At this session, we'll share popular consumption pricing strategies, show how to implement them in Zuora, outline how to ready an organization to meter and bill for subscriber consumption, and end with best practices for integrating metering of consumption with billing.

1. IMPLEMENTING A
CONSUMPTION-BASED
PRICING STRATEGY
Presented By
Zuora & DigitalRoute

2. Director of Product Management
Lukasz Weber

3. v
Sr. Solution Consultant
DigitalRoute
Ted Miller

4. v
Sales Engineer
Brian Truong

5. CONSUMPTION
What is consumption?
• Texts sent
• kWh used
• Miles driven
• CPU cycles spent
• Gigabytes stored or
downloaded
• Dollars processed
• Clicks captured
• And many more…

6. IS CONSUMPTION
GOOD?
What we’re seeing

7. The market is showing an increasing interest in
new monetization strategies
S3 Storage is priced per GB
consumed
Storage is also priced based on
GB consumption tiers
(ex: First 50 TB = $0.023 per GB
Next 450 TB = $0.022 per GB)
IaaS
Access (a BMW car, insurance,
maintenance, and roadside
assistance) is priced based on a
flat monthly subscription fee of
~$2000/month with a one-time
sign-up fee and 2k miles
allowance per month (with
$0.50/mile overage).
AUTO
Rides are priced based on a
number of variables, including
type of car/ride, travel distance,
time of day (surge), etc.
Also recently launched a flat
$299/month subscription that
includes 30 rides up to $15
each
B2C MOBILITY

8. What’s driving the need for new monetization
strategies?
Source: MGI Research,
2018

9. Top value drivers of new monetization strategies
GTM AGILITY GREATER
REVENUE
POTENTIAL
OPTIMAL CUSTOMER
EXPERIENCE
Enable business
model innovation
with new
monetization
strategies
Iterate rapidly and
launch new pricing
and packaging in
days, not months or
quarters
Enable customer
self-service, from
purchasing to
account
management

10. Pricing Should Be Simple, But Effective
Too simple?
• HBO NowZ: $14.99
• Netlix: $8.99/$12.99/$15.99
• AT&TZ: $40 per line/per
month, unlimited
consumption*
R E C U R R I N G
Too unpredictable?
• PG&E: Time-Of-Use/Tiered
• AWS EC2: Pure On-demand
Just right?
• Zipcar: $249/month +
$0.45/mile
• Azure: Reservations & PAYG
B L E N D E DU S A G E
Z – Current Zuora Customer

11. Finding the sweet spot with consumption-based pricing
Companies whose consumption-based pricing makes up 1-50% of their revenue
grew
1.5x FASTER
than companies with no consumption-based revenue

12. ADDING CONSUMPTION
Examples and an architecture

13. EXAMPLES
• Baseline subscription:
recurring
• Consumption pricing: pay-
as-you-go
Real-world example: Leading
Inflight Internet Provider
Inflight Internet
• Baseline subscription:
recurring
• Consumption pricing: multi-
attribute, based on
compute/storage resource
consumed.
Real-world example: Azure
Cloud Services reseller
Cloud Services
• Baseline subscription: recurring
• Consumption pricing: electricity
consumed.
Real-world example: Consumer
electricity provider
Energy Utility
01 02 03

14. ARCHITECTURE
Metering Mediation Billing
Typical consumption-based billing architecture:
• Owned by provider
• Collects raw consumption
data
• Retrieves raw consumption
data
• Transforms data to business
relevant usage records
• Loads data to billing
• Rates usage records
• Invoices Subscriber

15. MEDIATION
By DigitalRoute

16. Innovate on new business
models
• Off the shelf connectors to usage and metering systems
• Drag and drop designer for business logic
• Rapid integration to revenue systems
• Convert data into business information
Minimize revenue leakage
REMOVE THE HURDLES FOR USAGE
MONETIZATION
• Fully automated & flexible workflow
• Data quality & Error correction
• Transactional integrity
• Auditability

17. REQUIREMENTS FOR A
USAGE DATA PLATFORM
Using the right tool to capture and monetize usage
A U T O M A T I O N
Removal of error prone
manual processes to
streamline usage data
monetization.
A C C U R A C Y S C A L A B I L I T Y
Strong focus on revenue
leakage prevention,
industry-leading data
quality, and
comprehensive audit
capabilities.
To scale up massive
amounts of data
processing in real-time.
I N N O V A T I O N
To correlate and
aggregate usage-centric
data, and bind it to
specific fine-grain actions
in real time. Resulting in
new business models.
F L E X I B I L I T Y
With the ability to collect
data of any type, from
any location.

18. TRANSFORM DATA OF ANY TYPE, IN ANY
FORM, INTO USABLE INFORMATION
Business
Systems
Data
Sources
External
Systems Identity
Data
Collection
Enable
Normalizatio
n
Aggregation
&
Correlation
Business
Logic
Data
Quality
Usage
Binding
Governance

19. BILLING IN-FLIGHT SERVICE
The Amount of
Data Used
The Services
Used
Busine
ss
System
s
Data
Source
s
Externa
l
System
s
Identity
Data
Collectio
n
Enable
Normalization
Aggregation
&
Correlation
Business
Logic
Data
Quality
Usage
Binding
Governance
C H A L L A N G E
• Transformation of billing and usage data management
processes to meet market demands.
• Billing/rating of:
• Recurring charges for enabling internet access to the
Business Jet.
• Recurring charges for service packages and bundles.
• Discover the usage from each device on the jet.
• Charging of PAYG models.
• Forwarding billable usage data to and from the data
warehouse.
• Enriching Usage Data with reference data looked-up in
Zuora (e.g. account & product information).
• Erroneous Usage Data transferred to Salesforce and
corrected Usage Data retrieved from Salesforce.
• Correlation of Usage Data from the Satellite provider and
from the company’s equipment.
• Filtering out of non billable Usage Data.
S O L U T I O N
High Tech, Inflight Connectivity, 1200 Employees, Founded 1991

20. CLOUD USAGE CHARGING
Busine
ss
System
s
Data
Source
s
Externa
l
System
s
Identity
Data
Collectio
n
Enable
Normalization
Aggregation
&
Correlation
Business
Logic
Data
Quality
Usage
Binding
Governance
C H A L L A N G E
• Have become a reseller of Azure
• Azure bills the company based on usage. i.e. the company
needed to create a charge back model.
• Billing/rating of:
•Recurring charges.
•Usage charges.
• Forward billable usage data to Zuora.
• Audit information provided to the provider’s systems/users.
• Enriching Usage Data with reference data looked-up in
Zuora (e.g. account & product information).
• Pre-rating of Usage Data using the Azure rate cards.
• Cloud Usage from Azure and from stack usage from the
providers infrastructure.
S O L U T I O N
High Tech, Cloud Solution Provider, 87K Customers, Established 1997
INFRASTRUCT
URE

21. ENERGY BILLING
Busine
ss
System
s
Data
Source
s
Externa
l
System
s
Identity
Data
Collectio
n
Enable
Normalization
Aggregation
&
Correlation
Business
Logic
Data
Quality
Usage
Binding
Governance
C H A L L A N G E
• The company is looking to provide Electricity, Bulk Hot Water
& Air Conditioning usage services to their customer by
becoming a reseller.
• Billing/rating of:
•Recurring charges (for access).
•Usage charges (for the usage consumed per type of
service).
• Insertion of billable usage data in Zuora, and data
warehouse.
• Enriching Usage Data with reference data looked-up in
Zuora (e.g. account & product information).
• Usage Data Audit information provided to the company’s
systems/users.
• Collecting Usage Data from “Select Solutions” and “TCA”.
S O L U T I O N
Utilities, Electricity Provider, Founded 1995, +1,5 million Customers
TCA

22. PUTTING IT ALL
TOGETHER
Demonstration By DigitalRoute & Zuora

23. IMPLEMENTIN
G A
CONSUMPTIO
N-BASED
PRICING
STRATEGY
Is easy and
rewarding:1. Adopt the right pricing
strategy.
2. Meter your service.
3. Use a mediation layer.
4. Configure billing plans.
5. Test/Measure/Iterate to
maximize revenue growth
and minimize subscriber
churn.

24. ZUORA CENTRAL
A single platform to monetize and orchestrate subscription services
MONETIZE
• price & package
• bill & collect payments
• recognize revenue
• measure results
ORCHESTRATE
• send communications
• design acquisition, expansion,
billing, dunning, & renewal flows
• trigger provisioning
• sync external data

25. Q & A

26. SUBSCRIBED 2018