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Why a Billing Platform Is Key to Subscription Success

  • Jun 26, 2017
  • By 
    Subscription Insider

Kris Nagel, CEO, Vindicia 

Many of today’s fastest-growing companies are those that offer subscription services—like Netflix, Lifelock and Scentbird. The main reason for their stratospheric rise is simple: consumers love the ease and variety of the subscription model.

Businesses love it too, because it gives them recurring revenue and a predictable way forward. With a subscription model, a company can more readily calculate the lifetime value of its customers, more efficiently manage its inventory, more competitively price its products and more quickly build customer loyalty.

That’s all good. But none of it can happen without one essential ingredient: an intelligent and effective platform for billing customers on a recurring basis. And yet many subscription companies fail to grasp the power and competitive advantage the right billing platform can provide. They continue to operate with billing platforms that are inflexible and ineffective. Oftentimes the billing decision is left for the very last moment prior to a product or service launch without understanding the long term implications of the wrong decision. Just punch one or two different pricing offers into the system and wait for the customers to roll in, right?

Not quite. You need far more flexibility than that. Once a product or service is launched in a market the real learning begins. Often times price changes, product stratification, and customer preference often necessitate rapid billing system changes. And what happens when you want to offer special coupons or introductory discounts? What if you want to make an offer based on the season or an upcoming holiday? What if you want to offer promo codes for customers who come to you through an online ad or a TV commercial?

Some billing systems, especially homegrown systems, enable just one or two options: like, say, $9.99 a month. But that’s simply not enough. That’s the easy part. To grow your subscription business, you need the leeway to offer a wide variety of pricing plans, purchase options, bundles and more so you can attract new subscribers and retain current subscribers you worked so hard to convert in the first place.

In other words, you need much more than a simple billing platform. You need a comprehensive monetization platform that is constantly helping you create new revenue opportunities, recover lost revenue and gain competitive advantage.

Companies that still think of their billing and payment systems as back-office financial tools are putting themselves at a disadvantage. In reality, a subscription billing system is a strategic weapon that helps you compete effectively and win. With an agile and effective billing and payment platform, you can open up all sorts of new possibilities. You can create, package and price your services in innovative ways that your flatfooted competitors can’t hope to keep up with.

The Importance of Subscriber Data

Subscription companies need to answer a number of critical questions. How should you package and price your offerings to attract and retain the most customers? Should you accept a credit card as part of a free trial to drive conversions? Should you include taxes in your subscription?

The key to answering these and other questions is the subscriber data that’s embedded within your billing platform and waiting for you to exploit. The right subscription billing system will maintain a repository of highly useful subscriber information that allows your business to strategically and rapidly go to market in new and exciting ways. Such a platform will track every transaction detail, including the kinds of products or services purchased, the payment methods used, the coupons that customers responded to, whether the transaction succeeded or failed and much more.

Then you can leverage this billing and payment data to gain a competitive advantage. You can present customers with pricing, promotions and packages that are attractive to them and profitable for you.

Another advantage you can gain from your billing platform is geographic flexibility. People in different markets and different parts of the world expect to see products priced, packaged and promoted in different ways. For example, something as basic as the payment methods you offer is crucial. Presenting a user in Germany with three different credit card options does you little good because 75 percent of Germans don’t like to use credit cards or don’t have the ability to use one. They prefer direct debit. In other places, PayPal may be the most popular option.

Your subscription business needs a billing platform that supports many different payment methods and gives you the ability to acquire customers via their favorite option. At the same time, your billing platform should not overwhelm customers with every different payment option on the planet. It should be able to narrow the payment options to a handful of choices that are appropriate for a particular market or geography.

The Impact of Industry Knowledge

Billing data is strategic data. For instance, a new subscription business might want to know how it stacks up against other businesses in its space. It might want to compare dozens of key performance indicators against a group of peer merchants to see why some companies are better at acquiring and retaining customers.

Your billing platform can do this. It can compare dozens of key performance indicators against a group of your peer merchants to see why some of them are good at getting and keeping customers. It can then make recommendations for ways to do business better, everything from how to price products to where to expand globally.

Customer retention is critical to the success of any subscription business, of course, and your billing platform can help with this too. Customers leave for all sorts of reasons that have nothing to do with how well they like your product or service. Perhaps the customer’s credit card expired or the customer exceeded his spending limit for the month. Many subscription businesses automatically contact their customers each and every time there is a payment hiccup.

But some of these times may be a bad time. Say, for instance, it’s December and a loyal customer has just gone on a holiday shopping spree. His credit limit is maxed out and, as a result, his subscription renewal is declined that month. Instead of bothering him at this stressful time and incurring his irritation, it’s better to put him on a “retry” schedule, in which your billing system automatically retries the credit card every few days until the transaction is successful. A billing platform that can do this becomes your secret profit center, automatically working behind the scenes to eliminate failed payment transactions and helping you retain customers.

The Power of Flexibility

The bottom line is that an efficient and flexible billing system is fundamental to the success of your subscription service. Because when you have efficiency and flexibility, you have the power to create effective offers on the fly. You can quickly pick out the best way forward with methods like A/B testing, by which you test the viability of offer A against offer B.

More than a few companies with great ideas for a subscription business have failed because their billing system lacked the flexibility to make pricing and promotion changes quickly and effectively. They missed out on potential customers because they couldn’t test new subscription models. They watched customers churn because they couldn’t effectively adjust their subscriptions. They abandoned good marketing ideas because the ideas were too complex for their billing systems to handle.

And many more companies will fail in the months ahead because they’re still operating with outdated billing systems that don’t have the ability to quickly set up and tear down new product offerings and services. They’re relying on legacy platforms that require weeks or months to make the kinds of changes that a modern billing platform can perform in minutes. And they’re going to get burned by their competition.

Your subscription businesses simply can’t afford to treat your billing platform as an afterthought. As traditional billing technology grows outdated and gets outcompeted, you need to investigate modern subscription billing services that can help you gain insight into your business, better understand your customers and maximize your recurring revenue streams. That’s the key to success in today’s subscription economy.

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