The Pay-Per-Use Business Model Explained
The pay-per-use business model is when the customer is metered or charged for a specific usage of a product or service.
This type of business model is increasingly popular within the consumer media market (television and online services etc.) and attracts customers wishing to benefit from; • Flexibility • Choice of services • Different rates of pay • Per use / per download basis • Other varying requirements
As a result customers are charged in different ways, depending on the type of product/service opted for and time used. Overall, it is an extremely fair way of treating the customer or consumer as those who use a service sparingly can pay as they go, making it often practical and affordable.
Conversely because some customers use and require services spontaneously, it may be difficult for a company to judge the service that should be on offer, the regular income (or subscription) allows businesses to stipulate a minimum usage and income, guaranteeing a revenue stream. Businesses using this method will, of course, require some form of critical mass (ie a suitably sized customer base) to ensure basic services are on offer and can be enhanced from time to time.
Pay-per-use has been in existence for a considerable time, it is not the advent of technology that has created this new medium to access customers. Rental or hire is the most obvious.
The Internet has facilitated the pay-per-click model or even ready access to subscription based models for very short periods of time, such as hours or by project. Extensive use of paperwork and contracts are eradicated by the online world of access. Once again we use the terms that 'you can do business with anyone' in the world at any time for any product, as long as it can be communicated electronically.
The ‘Internet of Things’ is a world of new and smart networked products which themselves sense and generate data and communicate them for further analysis or intelligent adaptation. The pay-per-use pattern derives its enormous potential from this new product founded ability to gather and analyse information. Technologies to measure product usage have, always existed, but thanks to falling IT costs, new applications to support strong business cases are now very possible.
The Pay-per-use business model is here to stay. Expect more services to seek out this opportunity of access to a large market as businesses become more competitive and enter new markets.
Next week I will be discussing the UK steel crisis. In the meantime, have a great week ahead. Please share any comments you may on this article below and connect with me on: Twitter – Facebook – LinkedIn. For more insight into the behaviour and characteristics of entrepreneurs read Drive Like a Real Entrepreneur.