Billing & Monetization

How Billing and Revenue Management Influences Pricing Strategies

July 05, 2023

Considered an art and a science, revenue management analyzes data to predict the demand fluctuation of your products and services. And billing and revenue management (BRM), is often used by recurring revenue-based businesses that offer subscription-based billing, event-based billing, metered billing, and usage-based billing.

With a goal to maximize revenue growth and profitability, revenue management helps organizations predict demand. That way they can offer products and services to the right customer segments, at the right time, the right price and through the right channel. Now 50 years old, revenue management has undergone numerous advancements, extended its reach beyond early adopters such as airlines and hotels, and is making its way from the back office to the cloud.

Today, cloud-based revenue management solutions take the guesswork out of predicting demand, and optimizing pricing and availability. They help companies reduce costs, increase agility, improve performance and reliability, reduce revenue leakage, lower CapEx, improve security, and enhance the customer experience. In fact, cloud-based, enterprise-grade systems typically outperform their on-premise counterparts.

Drive Revenue with the Right Pricing Strategies

Pricing isn’t synonymous with revenue management, but it’s one of the most critical elements. Simply put, pricing involves determining pricing schemes based on factors like a competitor’s price or market demand. Revenue management applies data analytics to maximize revenue and increase profitability. Revenue management includes initiatives such as identifying new revenue streams, optimizing technologies and processes to improve performance, and expanding distribution channels.

Without the disciplines of revenue management, pricing strategies would be hit or miss. Let’s look at the revenue management process and how its relationship to pricing.

Collect and analyze data

Don’t overlook the data you collect. It’s a goldmine of information for analyzing your customers and their purchasing habits, subscription cancellations, plan changes, etc. With historical information in hand, you can identify patterns and use them to adjust prices and increase your profitability.

Analyze the market

Understanding the market is essential to know what customer segments to target, as well as customer needs, wants, and expectations.

Know the competition

Keeping tabs on your competitor’s pricing helps you better understand what your target market is willing to pay, and provides a baseline from which you can optimize your pricing. Be sure to track not only competitors’ pricing, but the features offered, their market share, differentiators, discounts, strengths and weaknesses.

Understand value (perceived and real)

This focuses on your customers and target market. By knowing how customers view your products and services (compared to your competitor’s), you’ll better understand competitive differentiations such as features and functionality. This information can then be used to your advantage to highlight certain aspects of your products and services and downplay others.

Select a pricing strategy

The final revenue management strategy is to select a pricing strategy. This takes into consideration all of the data you’ve accumulated and analyzed to develop pricing that aligns to the value of your offering(s), delivers profitability, and enables you to gain competitive advantage.

Where Billing and Revenue Management Intersect

Billing and revenue management spans numerous automated functions and is best described using five primary groups.

Charging: This determines how much to charge a customer for service usage. For example, a utility company will charge based on consumption of electricity, gas, or water. The usage of the utility will trigger an event for which usage charges are applied to the customer’s balance in real time.

Billing: Gathers all charges and compiles them in the customer’s bill. The amount due is sent to the customer via either a printed or electronic invoice.

Payments and Collections: Payments are made using a variety of electronic and manual methods such as debit/credit card, checks, PayPal, direct debit, lockbox, and hosted payment pages. The system can also make payment adjustments, issue credits and refunds, and perform dunning activities.

Customer Management: With account information stored in the database, the creation of an account or make account modifications become seamless. For instance, you can quickly and effortlessly inactivate an account, close an account, move customers to different pricing tiers, and manage the customer’s purchases.

Business Intelligence: Analytics is used to provide a variety of reports, as well as dashboards for real-time insights. Some of the most common revenue management reports include general ledger, tax calculation, revenue assurance used for ASC 606 and IFRS15 adherence, and debt management. Additionally, revenue management tools provide the ability to create consolidated, custom reports and dashboards.

When billing and revenue management work in unison, you gain the ability to increase sales, maximize revenue, improve profitability, enhance the customer experience, and leapfrog the competition.

Harness the Power of Billing and Revenue Management

Revenue management isn’t just about figuring out what price to charge. It’s an overarching discipline that has a direct effect on your pricing strategies… and ultimately your revenue and profitability. BillingPlatform, the industry’s market-leading automated revenue management and billing solution provider, provides a cloud-based, multi-tenant platform that enables customers to transform their billing and revenue management processes.

As a customer-centric company, we put the customer at the very core of everything we do. When Dext was searching for a billing and revenue management solution, BillingPlatform was selected to transform their go-to-market strategies to expand user base and deliver an exceptional user experience. As their CFO Nick Gilhespie explained, “Our legacy billing and revenue management processes were not keeping pace with the way we needed to do business, so our finance team was forced into a lot of manual effort to reconcile billing data to ensure accuracy and timeliness. This consumed valuable time and inhibited our growth. BillingPlatform will be a strategic piece of our core financial tech stack going forward to support not only our current needs but also has the flexibility to handle new billing models as we continue to grow the business.”

BillingPlatform was also recognized by Gartner® and MGI Research as a market leader for our automated revenue management solution. Are you ready to join the increasing number of companies that are saying farewell to pricing strategy guesswork and hello to informed decision making? Let us help you along the way.

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