Usage-based pricing (Pay-per-Usage)
Usage billing allows merchants to bill their customers based on how much of the product or service they consume after it was used. Usage can be billed standalone (without recurring charges), on top of recurring charges, or on top of usage already included in the plan (in which case it is known as overage). 2Checkout charges subscribers for usage at the start of a new billing cycle for metered resources consumed during the previous billing cycle. Usage billing is also referred to as metered billing, pay-per-use, and pay-as-you-go.
How usage billing works
For example, a communication platform charges their clients a monthly recurring fee of $9.99 and additional fees for how many messages and voice calls clients send out from the platform, as follows:
Volume-based usage fees for messages sent:
- $0.1 per message, if the customer sent 1 to 1,000 messages (in total) in a month
- $0.09 per message, if the customer sent 1,001 to 10,000 messages (in total) in a month and
- $0.075 per message, if the customer sent more than 10,000 messages (in total) in a month
Stepped-usage fees for Voice calls made:
- $0.2 per minute for the first 1000 minutes of voice calls made in a month
- $0.15 per minute for the minutes above the first 1000, but under 1500 minutes of voice calls made in a month
- $0.1 per minute for any voice calls made in a month above 1500 minutes
Assuming that in January 2020 Customer A uses the service to send out 800 messages and 1,100 voice call minutes, while Customer B sends out 5,000 messages and 2,500 voice call minutes in total for the same month, this is how much each customer will be charged when their subscription needs to be renewed for February:
|Customer||Subscription price - Feb 2020 billing cycle||Usage-based Pricing Option||Usage - Jan 2020||Usage cost - Jan 2020||Total billed|
800 *$0.1 = $80
$9.99 + $80 + $215 = $304.99
|Voice call||1,100||1,000 * $0.2 + 100 * $0.15 = 215|
5,000 * $0.09 = $450
$9.99 + $450 + $345 = $804.99
|Voice call||2,500||1,000 * 0.2 + 500 * 0.15 + 700 * $0.1 = $345|
Despite using the same services, customers will be billed different amounts, depending on how much of the services they used.
Usage Billing is included in our 2Subscribe and 2Monetize packages, but it is also part of the 2Bill add-on available for the 2Sell accounts. Contact 2Checkout directly if you wish to employ usage billing capabilities.
Set up usage-based pricing options
Add usage-based pricing options to subscription plans
To add usage-based pricing options to subscription plans follow these steps:
1. Log into your 2Checkout Merchant Control Panel.
2. Go to Setup → Products and scroll down to select the desired subscription plan (product).
3. After selecting the product/plan, click the Edit button.
4. In the next window, go to the Pricing tab of the product set-up and then to the Pricing configuration where you want the usage-based pricing option to be added.
Usage-based pricing options are currently only available for Pricing Configurations with base price.
By adding Usage-based pricing options to only certain Pricing Configurations you have the ability to customize pricing for different regions/countries.
5. If the usage-based pricing option does not exist, then click on Create new pricing options group button to add it.
- In the iframe window, select Pay per usage as Option type.
- Fill in the name and description of the new pricing option group, and optionally translate them into the languages you want.
- Fill in the unique code for the pricing option. This unique code will be used when uploading usage for your subscriptions.
- Select the usage pricing model:
- a Volume-usage model will apply the same price per unit to all units (similar to the Messages option in the example above)
- a Stepped-usage model will apply different prices per unit by progressively spreading units into the defined tiers (similar to the Voice calls option in the example above)
- Click Save to add the pricing option to the Available pricing options groups list.
Unit Prices are not automatically converted from one currency to the other. You need to specify what the price is in the currencies you will be billing this product option. Leaving a price of zero for a currency translates into usage not being billed in that currency.
6. Locate the newly added price option or the existing price option that you want to attach to your product in the Available pricing options groups list and click on Add now. You can add to a product as many usage-based pricing options as you want.
7. To save the Pricing Option Group to the list of “Active pricing option groups” on your product, click on Save.
Keep in mind that a Pricing Option Group added to a product will only be reflected on subscriptions created after the price option group was added.
Edit usage pricing options
You can edit the options on your Usage Pricing option group and have these edits impact all products that use that price option by clicking on Edit options for that pricing option group.
You can also edit the options on your Usage Pricing option group and have these edits impact only a specific product.
- Go to the Active pricing options groups list for that product.
- Click on the Pricing options group name and check the Use with different impact on price option before editing and saving the details.
Deactivate usage pricing options groups
You can deactivate usage pricing option groups by clicking “Deactivate” for the specific Price Option Group in the “Active pricing options groups” list for that product.
Usage pricing option groups can be deactivated only when all subscriptions with that price option group are canceled or expired.
1. What happens when subscriptions with a usage cost component are canceled?
The 2Checkout system does not attempt to renew or charge customers for canceled subscriptions, nor will it send out any notifications. Instead, consider disabling the automatic billing process to enable 2Checkout to collect outstanding usage payments.
2. Can subscriptions with a usage cost component be sold to partners via Channel Manager?
This functionality is not supported at this point in time.
3. Do affiliates get a commission from the entire value of the entire order (including usage value)?
Yes, but only if you're offering your affiliates commissions for renewal subscriptions.