The Usage Data Revolution Report, Part 2 of 4: Business Model Maturity

The Research in Brief

The aftermath of the 2022 SaaS crash and the subsequent shift towards profitability has fueled the integration of AI technologies into product strategies. This convergence presents a lucrative opportunity for SaaS companies to monetize artificial intelligence, although only 15% of businesses made progress in this area in 2023, according to OpenView’s SaaS Benchmarks Report. The industry-wide move towards profitability, driven by declining growth rates reflected in the ProfitWell B2B SaaS Index, has prompted SaaS businesses to consider the effectiveness of usage-based pricing models, inspired by successful examples like ChatGPT’s strategy. This aligns with the broader trend of integrating consumption-based approaches to maximize revenue and enhance customer satisfaction. 

In parallel to these trends, our research, presented as a 4-part blog series, explores innovative strategies and trends in the utilization of usage data by enterprise companies and their leaders. Spanning from Q4 2022 to 2023, the study involved 1,364 survey participants from software and media & entertainment sectors, including managers, senior managers, and CXO-level executives, providing valuable insights into leveraging usage data and navigating data complexity for business growth. 

In this blog, we introduce a business maturity model and framework for transitioning from basic subscription models to hybrid ones, offering insights and tips for each stage of business growth.

Business Model Maturity: Whare Are You?

This chapter provides a business maturity model and a 5-step framework developed by Stephan Liozu – Co-Founder & Chief Monetization Officer, Pricing for the Planet – to guide you through the different maturity stages.  

These models highlight the complexity that arises as companies transition from a basic subscription model to a hybrid one with various pricing strategies, metrics, channels, and platforms. 

Check where you currently stand today and follow the structured approach below to move to the next level:

Low Maturity Companies

For companies in their early stages of embracing subscriptions or usage monetization to scale their business.

Level 1: Basic Subscription Model

• Simple subscription model with potential small consumption components.   
• Introduction of add-ons, services, or per-hour consulting services.   
• Focus on understanding recurring models.

Maturing Companies

As companies mature, operational challenges become apparent. Akin to companies with data problems seeking streamlined operations, introducing usage-based models create complexities that can hinder growth.

Level 2: Hybrid Model

• Introduction of usage components into the subscription model.
• Hybrid model combining subscription and usage components.
• Increased complexity in data management and measurement.

Lever 3: Multimetric Usage-Based Pricing

• Multimetric billing based on several usage metrics.   
• Response to customer requests for fair pricing based on diverse metrics.   
• Significant increase in complexity, both in data gathering and tech stack implementation.

High Maturity Companies

At the pinnacle of maturity, companies with well-established subscription models face a new set of challenges — competition and disruption. The transition to a pay-per-use model is championed as a best practice, aligning with customer lifetime value and enhancing installed-base retention through adapted offers. This stage demands a reinvention of go-to-market propositions to stay ahead. in a competitive landscape.

Level 4: Multi-Sided Platform

• Transition towards a platform model.   
• Multimetrics and multichannels.   
• Selling through different channels and to different types of customers.   
• Introduction of a two-way transaction model.   
• Complex counting and measurement of transactions among a large group of potential stakeholders.   
• High data requirements for invoicing and counting.

Level 5: Advanced Platform-as-a-Service (PaaS)

• Further evolution towards a Platform-as-a-Service (PaaS).   
• Multimetrics, multichannels, and multi-sided platform continue to expand.   
• In-depth management of diverse stakeholders in the platform ecosystem.   
• Introduction of advanced monetization tools, such as commission fees, transaction fees, access fees.
• Integration of subscription-based, usage-based, and transactional-based models.   
• Significant sophistication in monetization strategies.

Considerations

Understanding Customer Needs Based on Value Metrics helps identify which metrics have the most impact on both customer satisfaction and the company’s economic success. 

Challenges in Designing and Implementing Usage-Based Pricing Models unfold as complexity increases in the tech stack. Failure to consider the IT infrastructure from the beginning can increase the risk of revenue leakage. 

Transparency in the Invoicing and Billing process is critical to maintain credibility with customers. 

Tips for Implementation

Customer segmentation can lead to a more nuanced approach, addressing different levels of sophistication among customers.

Deep consideration of IT and accounting capabilities, especially when managing multiple models simultaneously.

The move from single-sided relationships to multi-sided platforms requires careful consideration of data quality, stakeholder management, and monetization strategies.

Next part of the series:
Is Growth Your Growth Inhibitor?