What is usage data and how do businesses use it?
What exactly is usage data? How does it relate to subscriptions and billing? Why is processing usage data for business systems so challenging? Learn the basics here.
What exactly is usage data? How does it relate to subscriptions and billing? Why is processing usage data for business systems so challenging? Learn the basics in this three-minute read.
What is usage data?
The term “usage data” refers to any data about how a product or service is used. In the past, the term might only have referred to a visitor’s actions on a website, or tell you how many minutes someone has used their phone. Today, however, usage data is an essential part of a wide variety of services, across industries.
Think of usage data like an event log that tracks predetermined units of measurement. Anything from:
- Computing resources (like data and connectivity)
- Physical telemetry (like distance travelled)
- Product consumption (like materials, ingredients and chemicals)
- Service utilization (like licenses, software features and support).
In the telecom industry, usage data has historically been gathered from call data records (CDRs), and in other industries it might be called a usage data record (UDR). Whatever the acronym used, usage data is a systems-level record of how and when customers interact with your products and services.
The end result, however, is the same. As digital services have skyrocketed, companies have increasingly had more data about how customers use services available to them. Companies are using usage data as the basis of new services, like subscriptions or pay-as-you-go business models.
How can you use usage data to launch new services?
Unlock usage data to optimize your business
Turn any event into a growth opportunity
To monetize raw usage data you need to apply financial meaning and context to it, usually through a usage-based pricing strategy.
An effective strategy accounts for a lot of moving pieces. First you need to hone in on what your customers truly value about your offering – what capabilities are they willing to pay for every time they use them? What are the outcomes of those capabilities? Hubspot, for example, originally offered flat fixed packages as opposed to usage-based pricing. They then introduced contact-based pricing, where customers paid more depending on the leads the platform generated.
Like many companies who make the switch, you need to interrogate how your customers interact with different elements of your offering. Who uses it? Why? At what cadence?
These answers are critical. They don’t just help to fine-tune your new pricing model. They also begin to expose how your legacy operations need to adapt to serve a usage-based model – to support things like accurate billing, forecasting and partner settlements.
This operational change is critical. Monetizing usage data is a continuous process. You need to record and process usage data in real time, potentially millions or billions of times a day. Ensuring you can do that accurately is essential to providing transparent value to customers and understanding your own revenue implications.
How are companies monetizing usage data today?
B2B and B2C organizations alike are uplevelling how they capture and process usage data to create new revenue sources and stem revenue leakage. Here are a couple of examples that explore the broader ways in which you can monetize usage data. You can also find more examples here.
National railway operator leverages usage data to offer mobility as a service
A national railway operator in Europe wanted to make things easy for its customers, who often required different forms of transportation – even if that meant incorporating different operators into a single invoice.
So, where’s the problem? Without the right expertise, absorbing all this crucial but disparate information would have been near-impossible. Not only did they need to retrieve millions of relevant usage data points from multiple systems, they needed to consolidate them into one coherent format in real time, with zero data loss – and sync it to the organization’s billing system.
This is a great example of indirect monetization of usage data – where the company can create and settle more accurate and chargeable items across its own, and its partners’ infrastructure, while also improving the customer experience.
In-flight entertainment company automates its billing processes
For one in-flight entertainment company, usage data is critical to how they bill customers and share profits with partners. The company needs to keep track of how much Wi-Fi data and which services passengers use.
Wi-Fi and connectivity is a classic example of usage data: after all, most of us are familiar with phone plans with data limits that need to be measured. In this case, however, the problem lies in things being more complicated. The in-flight entertainment company dealt with hundreds of airlines – and thousands of passengers using their services while up in the air. Except without the right technology in place, they had to capture and process everything manually, in Excel sheets.
This led to errors, lost revenue and delayed billing. Only by switching to a solution that automated the collection and processing of usage data could they put, a stop to revenue leakage.
How is usage data processed to turn it into revenue?
Having raw usage data is all well and good. But the end goal – turning it into revenue – is wildly complex. If you want to use your usage data as the backbone of your revenue model, here are some steps you’ll need to take (and navigate that complexity).
Your solution takes data from disparate systems and makes it consistent.
That data is aggregated, enriched with data from other systems (like your CRM) and then bound to the customer profile.
The solution needs to automatically detect if there are any errors in the data and keep a record of the entire process.
Only once the usage data is enriched and matched with other data sources (think CRM or CPQ systems), and bound to a user, identity or asset, can your business logic can be applied.
Finally, your billing, auditing, marketing and BI systems register it as a revenue-generating event.
Where to go next
As we’ve seen, usage data is more than just an operational byproduct: it’s the foundation for a new generation of business models. Knowing how it works – and how to turn it into revenue – is critical to keep up with the growing consumer appetite for subscription-based relationships.
If you’re interested in learning more about how DigitalRoute’s solution can support new revenue streams and services, you should check out our ultimate guide to monetizing usage-based services.
Download our ultimate guide or visit our solution page to learn more. Ready to speak to an expert? Let us know by filling out the Contact Us form.
Report: The state of usage-based pricing in 2023
Here’s an overview of OpenView’s annual report on usage-based pricing in the software industry....
How CSPs can use holistic data management to improve analytics and increase revenue
CSPs struggle with siloed data, but what if all network data was easily accessible to improve...
The SaaS recipe for usage-based billing and product led growth
How can usage-based billing models support product led growth? Here’s a simple recipe for SaaS...
5 signs your SaaS company needs to improve its usage data management
If your SaaS company offers usage-based pricing, there’s a good chance you’ve built an in-house...
Is your SaaS company’s billing problem actually a data problem?
Planning a billing platform upgrade? Usage Engine, our purpose-built usage data management...
One of the biggest roadblocks to billing transformation
Despite an uncertain economy, enterprises are investing heavily in digitally transforming their...
Why video streaming services need user data more than ever
It’s no news that video streaming service providers are facing increasing competition,...
The future of music streaming services – why data matters
The good news for music streaming services is that they’re experiencing record revenue growth. The...
SaaS pricing in uncertain times – 4 things to consider
With record inflation and rising labor costs, many SaaS vendors are raising prices for their...
What are the key data challenges for “everything as a service” (XaaS) business models?
XaaS models provide mouthwatering potential. They provide untapped revenue opportunities and...
Can the “anything as a service” model (XaaS) supercharge your business?
What is XaaS, and how can it increase your revenue and improve customer experiences? Here are 5...
NWDAF through a new lens
5G presents a new paradigm for communication networks and is expected to lead the...
5 industries growing with “anything as a service” (or XaaS)
Offering "anything as a service" (XaaS) is a major trend with cross-industry appeal. Learn which...
What Deloitte’s report tells us about the IT-as-a-service trend
Deloitte’s second Everything-as-a-Service (XaaS) Study shows that enterprise use of...
SaaS companies and usage-based pricing: The perfect match
SaaS companies once relied on flat-rate subscriptions, but they’re quickly turning to usage-based...
5 ways subscription businesses leak revenue
Subscriptions business models deliver predictable recurring revenue, and make it easier to attract...
How your top 10% of customers could account for 70% of revenue
Have you heard of the 70/10 rule? It means that 70% of your subscription revenue can come from 10%...
Netflix’s story reminds us that ignoring revenue leaks is more than just missed income
After their first-quarter report back in April, shares of the streaming giant Netflix fell more...
6 data challenges in usage-based services that every business must know
Usage or consumption-based services are becoming increasingly common, since they allow customers...
Subscription pricing models: the 6 most common explained
Looking for the right subscription model for your business? Learn about the pros and cons of the 6...
How will CSPs restructure telecoms monetization for 5G and beyond?
The telecoms game has changed from selling metered minutes and megabits to address new enterprise...
The race for B2B services: How CSPs can optimize their business with usage data
5G technologies have made B2B revenues a mouthwatering prospect for telcos. We examine usage...
The data challenges in usage-based subscriptions
Consumption-based subscriptions are a proven way to rapidly grow revenue, but in order to succeed...
Why processing data for your billing systems causes revenue leakage – and how to solve it
Why revenue leakage is a big problem, and how correctly processing data for your billing systems...
How to move to usage-based pricing with Salesforce Revenue Cloud
Understand the backend, IT challenges of shifting to usage-based billing, and how DigitalRoute and...
5G charging requirements haven’t killed your online charging system (just yet)
Do you need to deploy a new converged charging system for 5G? Learn how introducing a flexible...
How CSPs can partner with enterprises to monetize 5G services
To recover 5G investments, CSPs will need to partner with enterprises and offer new services....
Accelerate invoicing by 80% through automated data processing
Discover how invoicing can be sped up by 80% by automating how you collect and process data in...
Why dirty data can stop quote-to-cash processes in their tracks
Modern quote-to-cash processes must be based on a data-first approach. Get insights on the dirty...