Pricing Models
A pricing model defines how you charge your customers for the goods or services you offer. It determines the structure of your pricing whether it’s a fixed rate, based on volume, or bundled into packages. Pricing models also help you optimize for customer behaviour, encourage upselling, and adapt to changing market demands. By configuring these models, you can tailor your billing to match customer needs and market demands.
Zoho ERP supports a variety of pricing models including Flat, Per Unit, Volume, Tiered, and Package pricing. These models allow you to tailor your plans to suit different business needs, ensuring accurate billing and a smooth subscription experience for your customers. With Zoho ERP, you can easily configure and manage these models within your plans to match your revenue strategies.
Configure Pricing Models
Different businesses have different billing needs. For example, a SaaS company might prefer flat or tiered pricing for its subscription plans, while a telecom provider may rely on volume or per unit pricing. E-commerce platforms might bundle products into packages, offering fixed pricing for a set of items. Pricing models in Zoho ERP is designed to meet these billing needs.
Here’s how to configure pricing models:
- Click Items on the left sidebar.
- Navigate to the Plans module at the top.
- Click + New to create a new plan.
- Select the product and enter all the required details.
- Click the dropdown next to Pricing Model.
- Select your preferred pricing model.
Types of Pricing Models in Zoho ERP
Flat Pricing
Flat pricing is a pricing model where a fixed amount is charged at regular intervals, regardless of usage or quantity. Every customer on the plan pays the same amount. This model is commonly used for subscription based services that offer a consistent set of features to all customers. Example: SaaS platforms with standard features across all users, Media streaming services, Online tools offering flat rate memberships.
How it Works: Let’s say Zylker Inc, a SaaS company, offers a software service and charges $99/month for access to its full suite of features. All its customers are charged the same fixed amount regardless of how much their customers use their service.
Pro Tip: Flat pricing works best when your product has a simple value proposition and customer usage does not vary significantly. It provides predictable revenue and a straightforward experience for your customers.
Per Unit Pricing
Per unit pricing is a pricing model where customers are charged based on the number of units they consume, with a fixed rate per unit. The total price increases linearly with the number of units used. This model is commonly used for services where usage is measured in units like number of users, GB of storage, or messages sent. Example: B2B SaaS, Cloud storage services, Communication platforms.
How it Works: Let’s say Zylker Cloud, a cloud service company, charges $1 per GB per month. If a customer purchases 150 GB per month, he/she pays $150 per month for the service.
Pro Tip: Per unit pricing is best when your unit of value is clear and consistent across customers.
Volume Pricing
Volume pricing is a pricing model where the unit price changes as the total quantity purchased increases. All units are billed at one rate, based on the total volume. This model is commonly used in businesses with sales driven models or usage heavy services. Example: Wholesale and distribution businesses, Telecom providers, Software licensing for teams.
How it Works: Let’s say Zylker Inc charges based on the total number of API calls purchased per month following volume pricing.
| Usage | Price per 10000 calls |
|---|---|
| 1–100000 calls | $8 |
| 100001–500000 calls | $6 |
| 500001+ calls | $4 |
If a customer purchases 300000 API calls, the rate is $6 per 10000 calls for all 300000. So the total cost = (300000/10000) x $6 = $180.
Pro Tip: Volume pricing is best when you want to encourage customers to scale their usage while keeping billing simple.
Tiered Pricing
Tiered pricing is a pricing model in which different quantities of a good or service are charged at different rates, based on defined tiers. Each tier has its own unit price, and customers pay according to how much their usage falls within each tier. This model is ideal for services where value increases with usage, but you want to gradually reduce the per-unit cost to encourage scale. Example: API-based platforms like payment gateways and analytics tools, Utilities like internet bandwidth and electricity billing.
How it Works: Let’s say Zylker Connect, a internet service provider, charges based on a tiered pricing model for bandwidth usage.
| Usage | Price per Mbps | Cost of the tier |
|---|---|---|
| 1 – 50 Mbps | $2 | $100 |
| 51 – 100 Mbps | $1.5 | $150 |
| Over 101 Mbps | $1 | Variable |
If a customer uses 150 Mbps, the cost is:
First 50 Mbps: 50 x $2 = $100
Next 50 Mbps: 50 x $1.5 = $75
Next 50 Mbps: 50 x $1 = $50
So the total cost = $225
Pro Tip: Tiered pricing is best when you want to strike a balance between profitability and rewarding customers as their usage grows. Make sure to explain how tiers work to your customers to avoid confusion during billing.
Package Pricing
Package pricing is a pricing model where a fixed price is charged for a predefined quantity of units or usage. The pricing is applied at the package level, not per unit, so there’s no unit price involved. This model is commonly used when services or products are sold in fixed bundles. Example: Prepaid telecom plans, SMS or email credit bundles, Learning platforms.
How it Works: Let’s say Zylker Learn, a edutech company offers video lessons in packages of 10, 15 and 20. It charges $50 for 10 video lessons, $100 for 15 video lessons, and $150 for 20 video lessons. If a customer purchases 15 video lessons, he/she pays $100.
Pro Tip: Use package pricing when your offering works best in fixed quantities or when you want to simplify billing for usage based products. Clearly define what’s included in each package to help customers understand the value and ensure clarity around overages or unused units.