basicthinking: The subscription model is certainly not new. However, more and more companies are now offering their products and services within an evolved “subscription model” – including from the manufacturing industry. This enables many companies to win new customers for themselves and retain them permanently.

The subscription economy is growing and growing. Whether it’s well-known brands like Spotify and Adobe or young startups, many companies strive for long-term customer loyalty; this is made possible by various subscription models tailored to individual needs.

The advantages of this approach are obvious: the costs of acquiring customers are gradually falling, while revenues are easier to forecast. Subscription billing therefore also represents an enormous opportunity for traditional companies to tap into new markets and establish themselves there.

Customers love a convenient service

and are willing to pay for it

According to a McKinsey study, 15 percent of all online customers take out at least one subscription to use goods or services on a regular basis. You benefit from a convenient, personalized and often less expensive option. And often it’s goods they would buy anyway.

But some consumers cancel their subscription after some time. The most common reason for this: they feel their personal customer experience is unsatisfactory. If the customer experience is seen by the customer as in need of improvement, churn rates are high. Accordingly, price is not always the deciding factor.

Subscription Billing:

Companies benefit from these advantages

In addition to the customer acquisition and revenue benefits already mentioned, there are other advantages that companies benefit from when they implement subscription billing:

• Companies need less time and manpower for their customer acquisition. At the same time, the chances increase that customers will remain loyal to the company for longer
• Subscription billing allows for different pricing models. Companies and products can thus be better distinguished from each other. For SaaS offerings in particular, this leads to an accelerated time to market, as services can be precisely tailored to the needs of specific customers
• Companies can better plan ahead for the number of customers, since one-time purchases are minimized. This helps companies budget more effectively and provides a more accurate view of their revenues
• Customers are inspired by the product in the long term and can be retained sustainably. Companies thus benefit from better monetization
• This in turn leads to more accurate collection of customer data. The offer can thus be tailored even better to the respective customer. Keyword: Personalization
• Since subscription models have no limit, companies benefit from a previously unknown scalability

The transition

to Subscription Billing do not underestimate

If companies are ready to move from one-time payments to recurring billing cycles, there are some challenges to overcome. After all, it’s not just the buying process that needs extensive adjustments, but also the entire customer journey.

Dynamic billing should therefore also be considered by companies in terms of rating, mediation, upgrades, downgrades, and one-time or recurring fees. In addition, the corresponding IT solution must also be integrated with all company-wide systems such as CRM, ERP and financial systems.

Companies should offer their customers multiple payment methods that allow recurring debits. Similarly, all disbursements from all connected payment service providers must be checked for completeness, due date and correctness. A payment clearing solution takes over these tasks including a complete accounting entry and a certifiable monthly closing.

Another key point that companies should consider when implementing a subscription billing solution is flexible billing. These should be sent to customers automatically at adjustable intervals. Only through a high degree of automation of these processes can great scalability be achieved.

Successful Subscription Billing

requires relationship management

If your company also strives for long-term customer relationships, it is important to consistently satisfy customers.

Subscriptions represent lasting relationships. Because the longer your customer is willing to pay for your services, the higher their customer lifetime value and, accordingly, your profit.

Therefore, pay attention to an optimal price-performance ratio. Only if your customers consider this appropriate, they will be willing to enter the subscription model.

In addition, your business should be adaptable. In the subscription model, the boundaries between products and services are fluid or, in the case of some services, no longer exist. With the necessary innovative ability and enthusiasm, you should therefore focus on subscription-based, experience-oriented service models.

Even companies from the consumer goods industry are switching over and offering their goods within a rental model.

The provider nexnet from Germany offers companies a holistic solution for this. Its Subscription Billing Platform is an efficient BPO solution and is also designed to manage international recurring payments and subscriptions. SOX compliance and the handling of different tax rates and foreign currencies are integrated.

Conclusion

Subscriptions make life easier for both companies and end customers. The goal when introducing subscription billing should always be to provide a lasting value proposition that customers will be happy about.

However, you shouldn’t underestimate a shift from one-time payments to recurring billing processes. The only way to make the switch is with custom-fit solutions, modern technology, and business processes that are tailored to them.