Billing Window: Why It Matters and How It Can Boost Your Business

In summary:

The Billing Window spans from the first to the last billing attempt. A wider window boosts billing success and retention rates.

The billing window has consequences on the monitoring and forecasting of the business, on the communication schedule.

In detail:

Some time before a subscription expires, the merchant must initiate a billing attempt. Renewal is automatic for the customer.

1. The billing window

The billing window is the time between the first and the last possible billing attempt. Typically, it spans from the first attempt to the subscription's expiration date.

The length of the window depends on 3 factors:

• what is technically possible ??
• what is acceptable to the customer ??
• what regulators or laws impose ??

Obviously the window cannot exceed one month for monthly subscriptions. The window will be only a few days for monthly subscriptions, but can be several weeks for annual subscriptions.

If the subscription must be renewed on the 30th of each month, it will seem acceptable to be billed on the 25th. On the other hand, a charge on the 5th will seem unjustified.

Regulators generally require that the first billing take place, at the earliest, one month before the expiration of an annual subscription and one week for a monthly one.

2. The billing attempts

If the billing request is authorized, the renewal is validated. The subscriber is charged and the merchant is paid. It's completed.

In case of a billing failure, the merchant will have to cancel the customer's subscription. In order not to lose the subscriber immediately, the merchant will make other billing attempts. He will try to change some parameters to maximize his chances of success.

3. What's the interest?

The interest of the billing window is to be able to spread the attempts over time. Sometimes making an attempt during the bank's opening hours or using a local PSP (Payment Service Provider) is enough to increase the chances of success.

Each attempt will add an additional fraction that will help increase the retention rate.

Still not convinced?

Let's imagine we have 10,000 subscribers to renew on a maximum of 4 attempts. The first attempt has a success rate of 66% and the following attempts of only 10%.

By increasing the number of attempts from 1 to 4, we go from 66% to 75.7% and we keep 903 additional subscribers.

4. What are the consequences on the business?

a. Monthly subscriptions

With a billing window of just a few days, retry opportunities are limited. Generally, in a same country, salaries are paid into bank accounts around the same time. Attempts taking place before have a lower chance of success. We then observe a seasonality of success within the month.

b. On Monitoring and forecasting annual subscriptions

The first consequence is explained in my article on monitoring annual subscriptions. Since the billing attempts are made before the subscriptions expire, there is a mismatch between the billing date and the expiration date. For the forecast and monitoring to be consistent, this must be taken into account.

Need an example?

Let's consider a 14-day billing window.

Since the first attempt is the one with the best success, the majority of subscriptions expiring in September will be collected between:

• August 15: 1st attempt for subscriptions expiring on September 1
• and September 15: 1st attempt for subscriptions expiring on September 30

However, some renewals will be collected as late as September 30, the date of the last attempt for subscriptions expiring on September 30. It's necessary to include some kind of flexibility in the forecast to anticipate this spread.

c. On communications for annual subscriptions

For annual subscriptions, regulators require that the merchant alerts the subscriber of the imminent billing (with price, date, link to "unsubscribe"). The subscriber must have time to unsubscribe. This creates a spread of renewal communications.

Need an example?

Consider a 14-day payment window and a 14-day cooling-off period. Therefore the renewal alert email must be sent 28 days before expiration.

d. The renewal period for annual subscriptions

As soon as the alert message of the imminent billing is sent, it's necessary to avoid distracting the subscriber. There's in fact a "renewal period" during which any other communication should be avoided. Lifecycle communications should be spread over 11 months rather than 12.

Key takeaways

1. The Billing Window is the period between the first payment attempt and the end of the subscription.
2. The majority of subscribers only need one attempt. However, there's a real benefit in increasing the number of retries as it increases your retention rate.
3. Especially for subscriptions with annual renewals, it's important to control your Billing Window to master your forecast and plan your communication schedule.

#Subscription #RetentionMarketing #Retention