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What is a Pay-As-You-Go Business Model?

pay as you go

Pay-as-you-go is a term used by subscription companies in letting people experience a product or service without the need to pay anything upfront before usage or consumption. This entails that clients can pay only for something and that they are billed right after. Pay-as-you-go is typically used by different companies nowadays, in a way to make payments affordable for everyone which often leads to customer loyalty and satisfaction right after.

Nevertheless, the pay-as-you-go business model is consumption-based, seeking for clients to have a payment method wherein they only pay for what they have used. This is different from a subscription-based model in that it does not let a user pay beforehand, but rather, right after they use it. In many instances, pay-as-you-go targets markets that are budget-conscious, those that are with low income, who cannot afford consistent payments . Consequently, it enables users to have a hold on their spending, letting them have control over their payments after usage.

Benefits of Pay-As-You-Go

No commitments

Some of us have been traumatized by paying for plans that do not seem to give us the end of the bargain. However, with a consumption-based business model, consumers have the flexibility of choice to whether they use a service or not, in a way that they have full control over what they pay after.

Ability to experiment

Companies may be doubtful about experimenting with the use of their products and services. Yet, with the pay-as-you-go method, companies can maximize their markets; it entails new monetization methods that introduce hybrid models and plans. Companies are also able to personalize their service according to client preference but still with full control, where there will be a customized plan with promotional strategies based on the experience you want for your customers. Nonetheless, it tracks consumer preferences better, for companies to know what is beneficial and sellable to consumers and what’s not.

Flexibility for the consumers

One key characteristic of gaining customer loyalty is flexibility in delivering goods and services. With pay-as-you-go, consumers will be able to pay one-time costs for the products to gain access and pay for them again when they need them. This prepaid feature enables clients to schedule when they need and want it to have access to a service, without the need to pay for them even if they have not utilized it.

Lower cost for entry

Having lesser costs for entry is beneficial for consumers and companies and vice-versa. Pay-as-you-go creates an affordable way for consumers to experience a certain product or service, which also serves as an entry point for companies to better serve their clients. Companies will then look for ways to serve the preference of the masses, making them come back when they need such service.

Examples of Pay-as-you-go companies

Telecoms – prepaid services for telecoms enable users to pay per usage without the need to subscribe to monthly payments

Internet Advertising – pay-as-you-go is also common to advertising, where businesses can opt to boost pages by paying them beforehand. By the time it expires, they have the freedom to choose if they want to boost advertising again or halt it.

Electricity and Water – you might have observed that you have an electric and water meter at home; this is also a pay-as-you-go service where you just pay for what you consumed using the metric system that’s calculated on your due date.

The Pay-as-you-go business model is common in all countries. While people are now more about practicality, they seek services that let them have full control over their payments based only on what they use. It creates an affordable, user-centric, and beneficial approach that makes consumers experience and pay for something that’s utilized, and avoid paying for what’s not.

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Written by Aiza Day

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