Practise vocabulary for pricing models, billing cycles, dunning, involuntary churn, and upgrade/downgrade language.
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1 / 5
Usage-based pricing in SaaS means customers pay:
Usage-based (consumption) pricing: Twilio (per SMS), Snowflake (per compute credit), AWS (per GB). Aligns cost with value: customers who get more value pay more. Reduces barrier to entry. Downside: revenue is harder to predict than seat-based subscription revenue.
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Dunning in subscription billing refers to:
Involuntary churn (failed payments) is often 20-40% of total churn. Dunning sequences: immediately retry → email 'Your payment failed' → retry after 3 days → 'Last chance' email → cancel. Smart dunning (retry on the day of month when success rates are highest) can recover 40-60% of failed charges.
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The phrase 'the customer churned involuntarily — their credit card expired and our dunning process failed to capture a new one' means:
Involuntary churn is recoverable: many of these customers would have stayed if the payment issue had been resolved. Prevention: credit card updater services (automatically update expiring cards), in-app warnings before expiry, PCI-compliant card update flows, and proactive dunning sequences.
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Proration in subscription billing means:
Proration example: user upgrades from $50/mo to $100/mo on day 20 of a 30-day cycle. They get a credit of ($50 × 10/30 = $16.67) for unused days on the old plan, and are charged ($100 × 10/30 = $33.33) for the remaining days on the new plan — net charge $16.67.
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The difference between 'end-of-period' and 'immediate' cancellation is:
Most B2B SaaS uses end-of-period cancellation: fairness (customer paid for the month), reduces support complaints, and the customer may change their mind before period end. Immediate cancellation is sometimes needed for fraud/abuse. Offering both with clear communication is a UX and legal best practice.