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Supposing you peddle subscriptions as part of your business or need interested customers for a particular service, facilitating those revenues can be complicated. A subscription management platform just might be the key to unlocking consistent revenue streams. Facilitate your subscription revenue and make certain your business is ready to tackle any challenge with confidence. Using your CRM software and other tools, you can manage subscription management services with ease. Read on to learn more about the power of subscription management and how it can help your business reach new heights!
Challenges And Benefits Of Subscription Management
Subscription management has been a popular trend for the past few years, with the convenience and ease of being able to have the items delivered straight to your door. In fact, over the past nine years, the subscription economy has grown by 435%, and it is set to become a $1.5 trillion market by 2025.
So you are thinking of subscribing to a subscription management service? But what are the challenges and benefits of subscription management? There are many benefits that come with online subscription management, such as saving time and money.
Improved Customer Retention: Owing to a subscription management system, businesses keep track of customer accounts and ensure customers are being billed on time. Many clients do not come back as they had to wait for a bill to pay.
Reduced Costs: A subscription management system helps businesses save money by reducing the costs associated with managing multiple subscriptions. It can eliminate the need for manual tracking and organization of multiple subscription accounts, streamlining the renewal process and saving time and money.
Improved Customer Service: Consumers trust more to companies with top-notch customer service. Businesses can achieve that while keeping track of customer accounts and ensuring that customers are being billed on time.
Improved Efficiency: Subscription management apps can help businesses improve efficiency by automating the process of managing subscription processes, billing, and cancellations. In this way, subscriptions are managed automatically and your business will receive more value from each customer, which will translate to more sales.
Better Data Gathering: Better data gathering is greatly aided by the management of subscriptions via an online service. This allows companies to provide the customer with exactly what they need, which can be better tailored to their needs and desires. For instance, businesses can offer promotional discounts on certain products or services only if a customer subscribes to their newsletter. Or they can provide free trials for a period of time before requiring subscription rates to be paid in full.
Understanding Subscription Management
Subscription companies have come out ahead in terms of increase in size. The Zuora Subscription Economy Index states that these types of businesses have grown four-point-six times faster in the past ten years when compared to the S&P 500 index.
This is noteworthy because the S&P 500 is a stock index made up of the 500 most renowned public companies in the United States, many of which have been around for decades and function in more traditional trade areas. Currently, the total combined market cap of all digital subscription companies stands at $14 trillion.
Subscription Types
Many types of subscriptions are available, ranging from streaming services such as Netflix and Hulu to subscription boxes like Amazon Prime, Apple Music, Spotify, Birchbox, and Loot Crate. The most popular type in the industry are:
Fixed usage subscription
The subscription model is a way of billing where consumers pay a fixed rate for a set number of items or services over a certain period of time. For example, you might see a magazine offered on a subscription basis where you pay every month or year to receive the magazine regularly. This type of billing is becoming increasingly popular, with 98% of people subscribing to at least one service and 75% subscribing to two or more.
Unlimited usage subscription
With the subscription model that offers limitless usage, one set price gives unrestricted access to a particular item or service. This could be for private use, like when joining a gym and gaining access to the amenities without any restrictions, or it could be shared, like a phone contract that gives unlimited calls and texts to multiple people across various gadgets.
Pay-as-you-go-subscription
A pay-as-you-go subscription is a type of subscription model where customers pay for services as they use them. This type of subscription is often preferred by clients who don't want to commit to a long-term contract and prefer to pay for services on a month-by-month basis.
With the pay-as-you-go model, customers have the flexibility to change their packages and products as their needs change, ensuring they always have the best products they need at their doorstep. According to a report by Recharge Payments, the industries that are supposed to benefit from this boost include Beauty and Personal Care, Food and Beverage, and Health and Wellness, which made up 54% of the combined market size in 2022.
Freemium model
The freemium model has become increasingly popular among websites and cloud service providers. It offers limited access to content for free, but additional features or content can only be accessed by paying customers. For example, many music streaming services offer freemium subscriptions. This means that any user can stream music online, but only paying customers are able to save playlists and listen offline. As per a report, 30% of Slack users convert their free accounts to premium accounts. This offer helped push the company to over 10 million active consumers.
Recurring Revenue Models
Recurring revenue models have become quite popular as of late. This is because they provide organizations with a consistent flow of income, which can help to create financial stability. Likewise, there are many different types of recurring revenue models, each with its own set of pros and cons.
Predetermined Service Charges over a Certain Period
This type of recurring revenue model requires hard contracts. When you and your customer enter into a contract period, you both understand that it will take some commitment to get the most out of that agreement. If a customer wants to end the contract early, they may incur a cancellation fee - but this can help prevent disruption for their service usage with you. Once their contracted term is over, your customers can continue on with rolling monthly contracts at the same predetermined service charges. With hard contract agreements, everyone knows what to expect!
Recurring Purchases for Perpetual Use
The sunk money consumables model is an extremely useful way of creating recurring revenue. You could look to Amazon Prime as a great example, as it integrates pay-per-product and subscription models effortlessly. With its incredible in-app rentals and purchases, it created a powerhouse. Recurring revenue models provide an opportunity for businesses to generate long-term stability, so take a look and see if there are any ways you can tap into this potential. It's an exciting time!
Automatic Resurgence of Subscriptions
This recurring revenue model gives your business the opportunity to produce stable cash flows. By setting up a program that offers an abundance of benefits – beyond what's included in the standard package – you can continue to charge customers until they willingly stop using your service. A well-known company Netflix provides a shining example of this model: The auto-renewal system remains in place until the user cancels their subscription. Let's take advantage of these amazing opportunities to ensure stable cash flow.
Scheduled Billing Founded on Product Use
In this recurring revenue model, businesses charge customers based on the successful use of their product or service. It's all about setting rates, scheduling intervals, and measuring usage. It's as easy as that! By doing this, you can see your revenue growing in no time at all. So why not give it a shot?
Free Lifetime Access to Basic Product or Service Plan
The 'freemium' model is a great way to bring in recurring revenue. Customers have access to the basic plan for free, forever. But if they want more advanced features and functions, they can upgrade to the paid plans. What's more, this encourages customers to stay loyal and engaged with your company for long-term success.
Recurring revenue is when you make money over and over again from something. There are diverse models business masters can use to make recurring revenue, depending on the product or service they offer. If you pick the right model, you'll keep getting paid a regular amount of money, which will help you stay stable and keep your business running.
Learning Customer Needs
Customers don't always know what they want until they see it. This is all the more so when it comes to subscriptions because customers are paying for something on a recurring basis without having any idea how much value they'll get out of it.
As a business owner, you can use customer feedback to better understand what your customers want from their subscriptions and which ones should be prioritized. Here are some questions you can ask:
- What do your customers think about their current subscriptions?
- What would make them happier? Which ones do they love and which ones do they hate?
- What features do they wish existed in your product or service that doesn't yet exist?
- What features could be added or improved upon?
- How might those changes affect the customer experience?
90% of consumers acknowledge that personalization makes any website more appealing.
How the subscription checkout process impacts customer retention
A good checkout process is like getting your food from a restaurant. You don't want to wait a long time, you want the experience to be smooth and easy, and you want to feel like the restaurant cares about you. That's what a good checkout process for subscription management does. It helps customers feel that their subscription is valuable and that the company wants them to stick around.
This can also help reduce customer cancellations since customers will be more likely to stick to their subscription plan when the checkout process is hassle-free. “The smaller the size of the screen, the more likely a customer is to not purchase,” Barilliance mentions. Mobile users show an even higher abandonment rate of 85.65 percent. Also, a good checkout process can help increase customer lifetime value since customers will be more likely to return to purchase additional items or services.
Checkout and payment process best practices
Keep the checkout process neat
Shopping should be fun and easy! To help make things simpler for our customers, we always strive to offer a streamlined checkout experience. Because of that, we want to create a checkout process that's quick, efficient, and above all else, simple. Experts estimate that conversions can be increased by a whopping 35.62 percent by implementing the right checkout optimization strategies. This means removing any unnecessary steps and reducing confusion by clearly outlining the steps in the checkout process.
Give users multiple payment options
Customers should have a variety of payment options available to them when it comes to making their purchases. Allow them to pay via credit card, PayPal, Apple Pay, Google Pay, crypto, and more. This will enable consumers to pick the payment option that works best for them, which can lead to an easier and more efficient checkout experience.
Inform them clearly about all fees and rates
Let's make sure buyers are aware of every penny they will spend! During checkout, you should clearly outline any additional charges or rates so shoppers know exactly what to expect. Making an informed purchase should be a breeze! In examining why shoppers do not complete their checkout, Baymard Institute's research revealed extra costs such as shipping, taxes, and fees are a major roadblock. Unsurprisingly, this was cited by 55% of respondents as a primary cause for cart abandonment.
Billing and invoicing best practices
The digital e-invoicing market is on its way to surpassing $24,726 million by 2027. Accurate billing and invoicing are together crucial for the success of subscription management. When subscribers are charged exactly what they owe, customer relationships remain strong, payments come in fast, and money is not lost unnecessarily. Investing in top-tier billing and invoicing practices will help maximize profits, improve customer satisfaction, and reduce potential expenses!
Precise billing and invoicing are crucial for sound subscription management. Without it, businesses may miss out on payments. Worse yet, if customers’ spending patterns aren’t monitored correctly they might end up overcharged or charged with discrepancies which could result in losing customers. Proper charging helps avoid potential problems and ensures that payments are delivered on time, ensuring customer satisfaction and increasing retention rates. In short — precise billing and invoicing are a must!
Business masters may employ these outstanding practices:
1. Utilize a secure customer relationship management (CRM) system: CRMs such as Salesforce, HubSpot, and Zoho provide an integrated platform for securely storing customer information and tracking customer interactions. 66% of businesses switch to a new CRM system because their current platform lacks the features they need.
2. Use customer agreement documents: Companies like Airbnb, Uber, and Amazon generate customer agreement documents that clearly outline the terms of service and establish a legally binding agreement between the band and the business.
3. Establish regular data audits: 74% of businesses say CRM software gave them improved access to customer data. Companies like Apple, Microsoft, and Dropbox conduct regular audits to ensure their customer data is accurate, secure, and up-to-date. IBM estimates that bad data costs US companies $3 trillion per year. Besides, your invoices won’t seem professional if they are full of mistakes, grammatical errors, or inaccurate data.
Communication and customer service
Research by American Express found that 86% of customers are willing to pay more for a better experience. Customers want to know that their subscription is valued and that their feedback is being heard. Companies that provide see-you-later customer service and communicate effectively can build customer loyalty and create a strong customer base.
Good customer service and communication help to ensure that customers are satisfied, their needs are met, and their concerns are addressed. Companies that provide friendly and helpful customer service are more likely to gain trust and repeat customers. According to Esteban Kolsky, 72% of clients will share a positive experience with 6 or more people. On the other hand, if a consumer is not pleased, 13% of them will share their experience with 15 or even more.
Up-to-scratch communication also plays a key role in subscription management. Companies should be proactive in communicating with customers about changes or developments in their subscription services. Clear and concise communication can help to keep customers informed and allow them to make more informed decisions about their subscription service. Nowadays, 67% of buyers prefer self-service over communicating with a business representative.
How can you reach this?
1. Provide Multiple Communication Channels: Offering customers multiple touchpoints to access customer services, such as a contact center, email, live chat, social media platforms, and self-service options, is essential to providing timely and efficient customer service. For example, Starbucks provides customers with a contact center, email, and social media support, which has resulted in a 70% decrease in call volume to their contact center.
2. Set Clear Expectations: Customers need to know how soon they can expect a response from customer service and what type of service they can expect. For example, Amazon sets customer expectations on its website, stating that they will respond to emails within 24 hours. This clarity has resulted in a 92% customer satisfaction rate.
3. Establish a Human Connection: Establishing a personal connection with customers is key to providing excellent customer service. For instance, Apple has a team of customer service reps that connect with customers over the phone.
Automation tools and analytics
Automation tools and analytics are invaluable for subscription management. Automation tools can help companies to streamline their operations by automating mundane, time-consuming tasks such as billing, customer support, and order tracking. Additionally, automation tools can be used to effectively segment customer data, allowing businesses to quickly identify customer segments and target their marketing efforts more efficiently.
Analytics can give businesses a comprehensive view of their subscription offerings, enabling them to make data-driven decisions.
ChargeBee helps companies manage and grow their subscription-based business by automating the entire process of collecting and processing subscriptions. ChargeBee has a lot of features, but one of its most popular ones is its API which allows developers to integrate ChargeBee into their own applications. ChargeBee also has a lot of integrations with other popular software like Stripe, Salesforce, and Hubspot.
RevenueCat enables companies to manage customers, drive revenue, and implement in-app purchases on iOS, Android, and the web. As the leading subscription app platform, RevenueCat wraps around Apple's StoreKit and Google Play, delivering a powerful backend for businesses around the world.
ChartMogul transforms raw data from multiple sources into aesthetically pleasing and easily understandable visualizations, allowing individuals within a company to gain valuable insights and unlock the full potential of their subscription billing data.
Subscription Management FAQ
What kinds of businesses have recurring revenue?
Examples of businesses that have recurring revenue include subscription services, cloud computing providers, software as a service (SaaS) companies, media streaming services, and telecom providers.
How to calculate monthly recurring revenue?
To calculate monthly recurring revenue, start by taking the total revenue for the month, then divide that number by the number of days in the month. Monthly recurring revenue is the total revenue from all sources minus the expenses of the company. Once you have that number, subtract that number from the total revenue to get your monthly profit.
How to calculate annual recurring revenue?
This is the amount of money that you make on an annual basis from your business. To calculate this, take your annual revenue and divide it by the number of months in the year. For example, if you make $10,000 a month and there are 12 months in the year, then your annual recurring revenue would be $1,200.
What’s Next?
Subscription management is essential for businesses that rely on recurring revenue. It helps them accurately track and forecast future revenue, anticipate customer needs, and deliver superior customer experiences. By implementing a subscription management strategy, businesses can maximize their recurring revenue, strengthen customer relationships, and create a competitive advantage over their peers.
Corytech is an innovative fully-featured payment platform that can help any business, from startups to established companies, to securely and conveniently process payments, manage customer relationships, and streamline operations. With Corytech, businesses can easily accept payments from customers and integrate payment features into their existing systems. Request a personalized demo to see how Corytech can help you.
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