The subscription model is certainly nothing new. However, more and more companies are now offering their products and services within a more advanced "subscription model" - including those in the manufacturing industry. This enables many companies to attract new customers and retain them in the long term.
The subscription economy is growing and growing. From well-known brands such as Spotify and Adobe to young start-ups, many companies are striving 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 prepared to pay for it
According to a McKinsey study, 15% of all online customers take out at least one subscription in order to use goods or services on a regular basis. They benefit from a convenient, personalized and often more cost-effective option. And it often involves goods that they would buy anyway.
However, some consumers cancel their subscription after a while. The most common reason for this is that they find their personal customer experience unsatisfactory. If the customer experience is considered by the customer to be in need of improvement, churn rates are high. Price is therefore not always the decisive 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 can benefit from when introducing subscription billing:
- Companies need less time and manpower for customer acquisition. At the same time, the chances of customers remaining loyal to the company for longer increase
- Subscription billing allows different price models. This makes it easier to differentiate between companies and products. For SaaS offerings in particular, this leads to an accelerated market launch, as services can be tailored precisely to the needs of specific customers
- Companies can plan the number of customers better in advance as one-off purchases are minimized. This helps companies to budget more effectively and provides a more accurate view of their sales
- Customers are inspired by the product in the long term and can be sustainably retained. As a result, companies benefit from better monetization
- This in turn leads to a more precise collection of customer data. The offer can thus be tailored even better to the respective customer. Keyword: Personalization
- Since subscription models have no limits, companies benefit from previously unknown scalability
The transition
do not underestimate subscription billing
If companies are ready to switch from one-off payments to recurring billing cycles, there are a number of challenges to overcome. After all, it is not just the purchasing process that requires extensive adjustments, but also the entire customer journey.
Companies should therefore also consider dynamic billing with regard to rating, mediation, upgrades, downgrades and one-off or recurring fees. It is also important to integrate the corresponding IT solution into all company-wide systems such as CRM, ERP and financial systems.
Companies should offer their customers several payment methods that enable recurring debits. All payments from all connected payment service providers must also be checked for completeness, due date and correctness. A payment clearing solution takes over these tasks, including complete accounting and a certifiable monthly statement.
Another key point that companies should consider when introducing a subscription billing solution is flexible invoicing. These should be sent to customers automatically at adjustable intervals. A high degree of automation of these processes is the only way to achieve a high level of scalability.
Successful subscription billing
requires relationship management
If your company is also striving for long-term customer relationships, it is important to consistently satisfy your customers.
Subscriptions are lasting relationships. The longer your customer is willing to pay for your services, the higher their customer lifetime value and, accordingly, your profit.
Therefore, make sure you offer the best value for money. Only if your customers rate this as appropriate will they be prepared to enter into the subscription model.
Your company should also be adaptable. In the subscription model, the boundaries between products and services are blurred or no longer exist for some services. 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 solution is very efficient and is also designed for the management of international recurring payments and subscriptions. SOX compliance and the handling of various tax rates and foreign currencies are integrated.
Conclusion
Subscriptions make life easier for both companies and end customers. When introducing subscription billing, the aim should always be to offer lasting added value that customers are happy about.
However, you should not underestimate the switch from one-off payments to recurring billing processes. The switch will only succeed with tailor-made solutions, modern technology and coordinated business processes.
Contribution from: basicthinking
