Note 49: Bill-level Pricing

Posted: 06 April 2008

The biller can use the consolidation performed in the billing cycle as an opportunity to perform additional processing against the customers' charges. Such processing is optional since the prices determined in rating may be sufficient for the biller's needs, or the charges may have been prepaid and so the full amount has already been levied. Discounting and repricing (rerating) can be performed within the billing cycle to differentiate the biller's offerings further.

The customer's billing frequency will affect how thresholds are applied. Customers may have a per month 'free' call allowance, but be billed quarterly. The billing system must take these frequency differences into account for both transaction-level pricing in rating, and bill-level pricing within the billing cycle.

Where charges have been stored in separate upstream systems (e.g. product specific rating), cross-product pricing may not have been possible. The billing cycle provides an opportunity for charges within a bundle's scope to be re-priced (rerated) using the rates outlined in the bundle's definition.

Transaction Rerating

The different methods outlined for use in transaction pricing (rating) prior to the billing cycle can be (re)applied if required within the billing cycle.

Triggers that can cause transactions to be rerated including:

Customising standard rates: Transactions such as phone calls may have been rated using the same rates for all customers. This can be due to limitations in the rating system's versatility, limited access to customer data from within the rating system, or a lack of information in one rating system about the products rated elsewhere (i.e. cross-product rates). When the information is consolidated for billing, the rates can be recalculated taking all customer and product information into account.
Bundled rates: Transactions may be priced based on the information available in rating, but a discount plan performed in the billing cycle may adjust the rates based on the customer's total spending picture (pattern, amount). Transactions are then rerated within the billing cycle using the adjusted rate plan.
Shared resources across product silos: Billers may process a customer's transactions in isolated systems separated (siloed) from each other and yet bill them based on pooled resources. An example of this could be where a customer is billed based on a quantity of 'free' minutes of phone calls performed on either their fixed or mobile phones, but all rating and processing prior to billing is kept separate in the fixed and mobile rating systems. Only when the billing system extracts both the fixed and mobile call information can the 'free' minutes be appropriately applied.
Delayed threshold rating: Transactions received in rating may have accumulated past a level that would trigger a new outcome (rate) under the threshold rating method. Rather than rerate all transactions as each threshold level is reached, the biller may delay rerating until the billing cycle (perhaps due to its proximity). The billing cycle can perform the rerating as it would have been performed earlier in rating.

Rerating within the billing cycle is costly in terms of infrastructure and other resources (elapsed time, maximum computing throughput) and is best used where rating before the billing cycle cannot be performed. The worst case situation is one where all transactions are rated within the billing cycle requiring high-performance infrastructure to perform the processing in a timely manner. This contrasts with the alternative that calculates rates in a measured and ongoing manner throughout the month with little or no rating performed within the billing cycle.

Discounting

Discounting is the process that deducts a fixed amount or percentage from a customer's charges, or performs equivalent processing such as increasing a non-financial threshold (e.g. free minutes). Customers may qualify for discounts based on meeting spending thresholds, or they may subscribe to 'discount' plans that reduce the price of charges meeting specific criteria.

The tier, threshold and 'from/to' rating methods can be used when performing bill-level discounting and re-pricing. The product metrics used to drive these methods will be defined in the customer's discount or rating plans.

As with rating plans, discount plans can be applied across market segments, or be negotiated with specific customers. In negotiated circumstances, the rate and discount approach may be negotiated together as a package.

Discount plans can be tied to term contracts, or stand alone perhaps with an associated recurring charge. Examples of discount plans include:

Number-to-number plans: This telecommunication plan uses customer-supplied destination telephone numbers to identify calls that will be priced at a reduced rate. A customer-centered variant of this approach dynamically identifies the most frequently called numbers each month before applying the discount.

These discount plans (also known as 'Family-and-Friends' discount plans) can be used to provide discounts to numbers commonly called by residential customers. Similar approaches can be used to discount calls performed between business offices. An enhancement to this approach is to only discount where both caller and recipient are on the same network and signed up to the discount plan. This two-way connection provides an incentive for groups to consolidate their purchases on the same network, which can be easier to do within a business than between family members or friends.

A calculated percentage off: The customer's total spend is used to derive (e.g. using a tiered or threshold approach) a percentage that is then applied to reduce a customer's charges. These reductions can apply at the individual charge level, apply to a subset of all charges, or be performed against the entire bill (perhaps as a whole-of-bill credit rather than separate discount amounts).

A calculated amount off: Similar to the percentage off, the customer's total spend is used to determine a fixed amount that is applied against specific charges, apply to a subset of all charges, or is applied to the customer's bill as a rebate.

Consolidation discount: Customers who consolidate their billable services (e.g. fixed phone, mobile phone, cable TV, gas, electricity) on one bill, or purchase all their services from one provider (i.e. the biller), qualify for a percentage or amount off their bill. Bundled pricing is one example of how consolidation discounts can be applied. Due to the consolidation discount, the customer with a multiple service bundle can expect to pay more if they receive multiple bills from the same biller, or purchase their services from multiple providers.

Customers who receive a single bill each month (rather than many) cost the biller less in postage, improve the biller's ability to monitor their payment status (credit management), and associate services that should be suspended/canceled when payments are not forthcoming.

Where discounts are applied to charges, billers can choose whether to apply correctly differentiated rates in rating and perform no discounting, or apply standard rates during rating and discount from them during the billing cycle. The decision of which approach to take may be forced if the rating platform does not have timely and accurate access to the customer's specific rate and/or discount information. A customer's rates may change when they commence or cancel rate plans or bundles, and the rating platform must have visibility to these changes if the correct prices are to be calculated.

Cross-product discounting may also be possible where all the products in a bundle are present in, or accessible from, the one rating system prior to the billing cycle. Where charges for part of the bundle are stored and processed separately, the correct bundled rates may be impossible to apply during rating. This situation will necessitate the charges being discounted or re-priced (re-rated) within the billing cycle.

Discounts based on the total bill's spending cannot be performed elsewhere or earlier in the billing process because they rely on the bill's totality to drive the discounting process.

A customer's discount (and rate) plans may be associated with specific services, or may apply to the entire bill or customer (who may receive multiple bills).

Tags: Billing, Pricing, Discount