What is the difference between Billing and Monetization?

Billing and Monetization are two essential parts of any business since they act as the two wheels of a revenue-generating bicycle.

Billing is the process of various functions, like calculating charges (using mediation with appropriate pricing models), sending invoices, and collecting payments for a service or product. The job of the billing system goes beyond just collecting payments in terms of dunning management and revenue reconciliations. For example, the services offered by any streaming-based company – send you an invoice for the recurring subscription you opted for and allow you to make payments to continue with the service.

On the other hand, monetization refers to a platform that provides various strategies for generating money from your digital creation, product/service, or other assets. For example, a blogger with a popular website that gives a good amount of traffic wants to monetize his website by displaying promotional content/products and educational courses he wants to sell. To convert the blogger’s idea into money would require a monetization platform that internally works with a billing system – where billing concentrates on the practical aspects of collecting payment, and monetization is the creative plan behind it.

A Quick Guide:

Let’s look at the simple decision map below that could help you understand if your business falls under billing or monetization.

Suppose you are running a small lemon juice (lemonade) business where you are not only involved in collecting payments; instead, your first job is to focus on how to earn money by selling refreshing lemonade, and of course, you will need to charge customers by sending invoices and collecting payments. It implies that it’s monetization time, and that is where you can get creative and turn your delicious drink into cash.

Let’s examine the different ways and means by which you could generate more money with your lemonade. Below are some common monetization strategies with lemonade examples. However, you can find more insights into pricing strategies.

• Freemium Model:

It is the most proven model and works well, which means starting from free to premium. Here, customers get easy access to services and products with limited features at no cost. If someone wants more features and important functionalities, choose a premium option with charges. This strategy allows your consumers to evaluate your product’s quality and service, and at the same time, it encourages them to subscribe. It also helps your business add more customers and increase customer loyalty.

In our case, you could offer a small cup of juice for free for each customer, but you definitely should charge for subsequent cups or fancier options depending on juice quantity if someone asks for medium, large, or more cups.

• Transaction-Based Model:

As the model name suggests, it allows you to charge customers for each sale, which means revenue comes from each transaction against a product or service. It’s well suited for tangible goods or one-time service engagements.

In our lemonade case, you can charge the customer a flat price per cup, but feel free to offer some discounts on specific occasions; this allows you to attract more customers.

• Subscription Model:

It is the most popular strategy in today’s business scenario, where customers pay fixed recurring charges (monthly, annually) for access to a product or service. Streaming services and online courses are some examples. This model provides good predictable revenue and facilitates continued customer relationships.

In the case of the lemonade business, this model could offer you a more regular and predictable source of revenue. Therefore, you can set up a club called “Healthy Refreshment Club” and then work on various subscription plans like daily, weekly, and biweekly that you want to offer at a fixed price. With this model, those who join the club will get regular deliveries of lemonade — guaranteed refreshments! So this model seems perfect for a group of friends or thirsty families!

• Usage-Based Model:

It is also known as a consumption-based pricing model, which allows customers to pay only based on their actual usage of a product or service, not on paying first, presuming how much they will use. It comes with a subscription and basic fee but imposes additional charges for all extra usage or consumption. If there are no overuses, then the customer will only be charged a basic subscription fee without any additional charges. This model helps businesses monetize their heavily consuming customers, as they will cost you more to support. 

In the lemonade business case, they can use this model where customers will pay based on actual consumption of lemonade and subscribed plan.

The billing engine serves as the backbone of a monetization platform that helps businesses charge customers and collect money automatically; additionally, it also plays a crucial role in revenue reconciliation and follows best practices to avoid any negative impact on your business. 

Considering the above, inefficient billing processes can be a silent thief and lead to revenue leakage that you have earned. This problem mainly occurs when a business grows with more customers and the existing processes take longer than expected due to a lack of scalability.

Further, companies often face challenging situations with inaccurate invoices due to incorrect charging, especially in complex scenarios like when a customer changes plan (upgrade/downgrade) and needs proration. Another common issue is payment collection reconciliation can lead to a frustrating experience for businesses plus your customers, ultimately hurting your bottom line.

➣  Revenue Loss:

As stated above, a few areas in billing, like incorrect pricing strategy, errors in proration calculation, and usage charging, result in revenue leakage and eventually make a significant impact on the company’s growth. You can get more details about revenue leakage.

➣ Poor Customer Relationships:

The primary cause behind spoiled taste in customer relationships is late and confusing invoices and delayed refunds. In such cases, customers may leave your service, and as a result, it directly impacts the company’s revenue.

➣ Legal Trouble:

In some cases, companies might get a legal notice from consumer court (depending on country-specific laws and regulations) due to incorrect bills or delays in refund, etc. It further causes the overall company’s growth and revenue loss due to penalties.

To Sum Up:

In brief, billing and monetization are vital yet hold different aspects of running a business successfully. The billing is all about the charging and revenue collection mechanism, including pricing strategy, sending invoices, collecting payments, and revenue realization. At the same time, monetization (in a broader sense) refers to an organized process of generating revenue from valuable assets or resources. Therefore, monetization cannot achieve its goal without a flexible billing system. Let’s take an example of a bike, where we can see how removing one of the wheels would defeat the overall purpose.

Thus, the monetization billing platform needs a well-aligned billing solution that should support complex billing use cases and customization to help businesses streamline their billing workflows the way they expect. The EarnBill offers a billing system with all these features, capabilities, and an automated monitoring system to keep a tab on consistency, alert concerned teams to take necessary action, and provide a billing domain expert team to help overcome any billing-related issues/queries and ensure customers are happy with a smooth billing experience, ultimately boosting your revenue stream.

“Let’s avoid billing headaches that drain your revenue with the help of the EarnBill solution!“