Pattern description

In this model, the actual usage of a service or product is metered. The customer pays on the basis of what he or she effectively consumes. The company is able to attract customers who wish to benefit from the additional flexibility, which might be priced higher.

Inventive problems

Application examples

The Pay Per Use pattern spurred the creation of a variety of innovative business models including the Internet advertising ‘pay per click’ model. Rather than having to pay for displaying their advertising, advertisers are charged according to the number of times Internet users actually click on a given ad. Start-up GoTo, which used this billing method for the first time in 1998, is credited with having invented the pay per click option. Pay per click has now become one of the dominant models in online advertising. Google, for example, generates over 90 per cent of its advertising revenues with pay per click ads.

In 2008 Daimler launched its car-sharing concept Car2Go, which represents an innovative application of the Pay Per Use pattern. Typically car sharing or car rental services lend their vehicles by the hour or day. Car2Go takes a different approach: customers rent Car2GO cars by the minute. Furthermore, they do not have to specify a return time and are permitted to hand in keys at their convenience. Car2Go also differs from other car-sharing services in that customers are not required to pay a basic annual fee, but simply a one-time fee on initial registration. Car2Go has taken a page from the telecommunications companies’ playbooks by charging its customers for their actual usage of its services. Customers appreciate the flexibility and ability to control costs afforded by Car2Go, and Daimler seems to be on the right track with this form of car-sharing service. After early pilot tests in Ulm, Germany and Austin, Texas, the Car2Go offer is now available in eight North American and nine European cities. By 2016 the company aims to reach at least 50 additional cities.

References

The Business Model Navigator: 55 Models That Will Revolutionise Your Business