Factors to consider when developing a subscription based / SAAS website

We’ve all become acutely aware that subscription based business models are highly attractive. The reasons for this are numerous but most importantly due to the fact that they generate recurring revenue and their scalability.

In the online space, there are loads of examples of this, especially companies that used to have more traditional once-off purchase models that have shifted to subscription based models. For example way back in the day you would buy a CD pack for the Microsoft Office Suite or take Adobe Photoshop and related products, typically these were once-off purchases with upgrades from time to time but now they are all available through subscription based offerings.?

Now you’ve realised that this is an attractive business model and one that can be highly rewarding and lucrative if done right.?

Websites, web apps and mobile apps are a great mechanism in which to reach global audiences and offer these subscription and SAAS (Software as a Service) based offerings.?

The startup world is rife with new web and mobile apps that are changing the world. Now you’ve realised you want to go down this route and offer a subscription based service, so that you can scale and grow into the next high-flying tech startup.?

Before you jump into the development of your product there are many important aspects to consider that are specifically related to the subscription mechanisms. These can have a big impact on the success of your startup and getting them wrong can be detrimental to the success of your new digital product.

ARE YOU TARGETING LOCAL OR INTERNATIONAL CLIENTS?

The answer to this determines quite a few factors that change depending on whether you’re looking to launch a local offering or an international one.

LOCAL:

If you’re going to go local, you would most likely offer your pricing in the local currency, for example in South Africa you’d look to price your subscription packages in ZAR (South African Rand).?

This allows potential subscribers to understand the pricing straight away and not have to do currency exchange calculations. Currency fluctuations also don’t impact your future subscription price as it’s locked in on your local pricing.?

INTERNATIONAL:

Going international is great and many startups look to go this route from the start, as they are able to target a much bigger target market and it significantly improves the chances of scaling.

With regards to the currency, you’d definitely want to offer your pricing in US Dollars, however, if you’re targeting Europe for example or the United Kingdom, you may want to offer the pricing exclusively in those currencies but the ultimate offering would be to offer the customer pricing in a variety of major currencies, this allows them to convert the pricing in their local (major) currency and understand the costs.?

Bear in mind, that currencies do fluctuate, and therefore if you’re customer is signing up in a certain currency at a certain amount all future subscription billings need to be consistent, otherwise, this will raise eyebrows and allow your subscribers to question the billing, which is a massive risk to you churning (losing) subscribers.

WHICH PAYMENT GATEWAY ARE YOU GOING TO USE?

Once you’ve determined if you’re going to target local subscribers or international subscribers, you will be in a position to decide which payment gateway or gateways you are going to integrate into your website or mobile app.

LOCAL:

If you’re going to go the local route, then it is best to integrate with a local payment gateway that can process payments in your local currency.?

There are quite a few big international payment gateways that cater to the processing of local currencies but you would need to research this and see whether your currency is supported or not, as well as do due diligence on the fees that the respective payment gateways charge.?

In South Africa, we have quite a few payment gateways, such as Payfast, Peach Payments, Paygate, and Yoco to name a few.?

INTERNATIONAL:

There are loads of payment gateways that you can look to for the processing of payments in all major currencies, for example, Stripe, WorldPay, PayPal, and WePay.

ALTERNATIVE PAYMENT METHODS:?

There are a few international payment gateway providers as well as other financial institutions that provide alternative payment options, such as Paypal and Apple Pay.

PayPal, allows users to use their PayPal account to pay rather than a credit card, this is convenient and needs to be considered especially when targeting international subscribers.?

Apple Pay works with Apple devices such as iPhones and iPads, etc. Apple Pay allows you to make secure contactless purchases in mobile apps and on the web. It’s a really convenient and safe way to pay, with many Apple users choosing this method of payment.

WHAT ARE YOUR BILLING INTERVALS??

If you’re offering monthly billing, you need to consider if you bill all subscribers on the same day once a month or are subscribers billed monthly on the day they subscribed. If the latter is the case, provision needs to be made for subscribers that sign up at the end of the month (29th, 30th, and 31st), as not all months have 31 days, therefore the billing cycles need to be adjusted to cater for this.?

If you’re offering yearly billing, this is fairly straightforward but remember that leap years can cause problems, so a simple solution to that is that if there are any subscriptions that start on the 29th of February, simply default the future billing date to the 28th February.?

WHAT DO YOUR PACKAGES LOOK LIKE?

Are you going to offer simple packages for example, monthly only, or a monthly and a yearly subscription option? Or are you wanting to offer more complex packages, for example monthly, quarterly, half-yearly, or yearly?

Bear in mind that keeping it simple is what has worked best from our experience when developing subscription based web solutions. This is from a development perspective and a customer’s perspective.

DEVELOPMENT PERSPECTIVE

Simply put, the more options you have the more development work is done to cater to these packages and more integration work needs to happen when integrating with the payment providers.?

With an increased amount of subscription options, come more options for users to upgrade and downgrade. All of this logic and functionality needs to be custom developed, meaning that the project will take longer, the development code base will be more complex, and more testing is required and this all ultimately drives up the price.?

CUSTOMER’S PERSPECTIVE

You may think that providing subscribers with many options is a good thing, this may be the case in certain business models, but generally giving subscribers too many options can confuse them or gives them too much to compare and they eventually make no decision at all.?

Your goal is to convert your prospective lead into a paying subscriber. Making it simple with minimal or no choices reduces the choice selection (analysis paralysis).?

We’ve found that monthly subscriptions by themselves are straight to the point, people are familiar with them and users understand this.?

We’ve found that by giving users the option to choose between yearly or monthly subscription, you could offer some sort of a discount. For example, if the user chooses the yearly subscription, they only pay for 11 months. This way you’re locking in users for a year and you can generate decent cashflow at the start of the yearly subscription period.?

The key takeaway here is: keep it simple! Less is more!?

CANCELLATIONS

Similar to failed payments, cancellations are sadly also inevitable with subscription based websites, apps and SAAS solutions.?

You will need to consider how you handle cancellations. Referring back to how you structure your packages, the simpler your package structure is (the different subscription options you offer) the easier it is to handle cancellations.?

The subscription cancellation option should be easily available for subscribers to access and not hidden away in some obscure zone. This will only anger people and not want to re-subscribe in the future. If they want to cancel, let them cancel.?

Incorporating surveys that capture subscribers’ feedback as to why they are canceling and what could be improved to prevent this are valuable ways to find out what’s not working. Verifying this information and making enhancements to your product will make the product better and more valuable for existing and future subscribers, which in turn will reduce your cancellations and keep your churn rate low.?

As they say in the startup world: “your customer builds your product for you”, which refers to the process of users and subscribers providing feedback and insights on what’s working, what isn’t, and what new features would benefit them. Now all you have to do is assess these requests and implement the ones that are common.?

MANAGING CARD REPLACEMENTS

Credit, debit and cheque cards all have expiry dates, so it’s important to first inform users in advance that their card is expiring and that a new card needs to be loaded into the website or mobile app.

The facility to allow users to replace their cards needs to be developed to allow subscribers to change their cards as needed. This ensures that payments aren’t missed and subscriptions lapse.?

STORING CARD DETAILS

You may wonder how subscription websites, web apps, and mobile apps store credit card data to ensure that the billing can happen seamlessly for future billing cycles. You’re also probably thinking, “Do I really want to be storing card data? Surely that’s highly risky?”. Luckily you don’t have to worry about storing any card data.?

This is where the integration with payment gateways comes in and in particular how card tokenisation handles all of this. Read more about how this nifty solution works.?

AUTOMATED NOTIFICATIONS AND REMINDERS

We encourage that there are automated notifications and reminders sent to subscribers regarding their subscription. The question is how far do you want to go? You need to find the perfect balance between communicating adequately with your subscriber and also not annoying them by overcommunicating.

You may want to consider reminding the subscriber in advance that their subscription will be billed, however, this isn’t always common practice and necessary.?

Should a payment fail for whatever reason, we believe this should be communicated to the subscriber, you can inform the subscriber of the next steps that will be performed on your side (if there is an automated billing attempt(s)) or if you need them to make a manual payment.

Once payments are received, more often than not the user is informed with some sort of billing receipt or invoice.

We encourage that these messages are branded, to reinforce your brand.

Most of these communications will take place via email but there are times when text messages and push notifications can be considered, the latter is used in the case of a mobile app.

HANDLING FAILED PAYMENTS

As much as we’d love to tell you that this won’t happen, failed payments are a reality and can be a common occurrence with subscription based payments.?

So you now know that they are avoidable but you need to devise a strategy and process for dealing with missed or failed payments. Many of these can be automated, which is great as the tech can do the arduous process of recovering failed payments.?

There are considerations and rules to bear in mind, in terms of the impact of a failed payment. Do you lock them out of their account or do you allow them to log in and use the service for a limited time until their access is cut off?

Do you try to recover the failed payments automatically and if so, is there a limit? For example, if users are billed on the 5th of each, do you then try to recover the failed payments again on the 6th and 7th? After which if the payment has still not been successfully made, they’re cut off?

Are there loyalty points involved that the user has accumulated and what happens to these once their payments fail?

There are many ways to skin a cat and there are many ways to deal with this situation but it’s always important to give your subscribers the ability to make the missed payment whether this is automated and then somewhat manual. This will go a long way to preserve the relationship and ensure your subscribers stay… subscribed.?

Coupled with the above point, communication is key to informing subscribers that their payment has failed and what the next steps are, as well as when you need them to make a manual payment as a last resort.?

PRICING CHANGES

When designing and structuring your subscription based product you also need to determine if pricing will ever change.?

In business, there are always changes and it might be inevitable that you need to change pricing. This is definitely possible but can be challenging, especially if the impact of a pricing change means you start to have different tiers of subscribers on different pricing amounts.?

With the automated nature of subscriptions and SAAS solutions, any pricing increases will need to be developed into the system to ensure that they are automatically applied. This requires careful planning, loads of testing and skilled development expertise to pull this off in a way that the upgrades are done seamlessly.?

UPGRADING AND DOWNGRADING

If you’re considering offering different tiers of pricing and different billing periods, then you also need to consider the fact that you need to allow users to potentially upgrade and downgrade. This can become quite complex and you might want to restrict certain upgrades or downgrades from the start.?

However upgrading and downgrading from a custom development perspective should all be possible, but all scenarios and exceptions need to be determined and considered when developing the functionality to allow subscribers to chop and change.?

SO WHAT’S THE VERDICT

When wanting to go the subscription route for your web app or mobile app, there are certainly many factors to consider, some obvious and some not so obvious, however, if the way that the subscriptions work and are structured, is planned and executed correctly this can definitely work.?

Make use of technology as much as possible to automate all the processes so that human mistakes are avoided. By automating your platform, you will be able to scale easier and quicker.?

Many people when they think of subscriptions, think of a convoluted and massive system to cater to all scenarios, but this doesn’t have to be the case. Try to keep the billing periods and packages as simple as possible, as this has several benefits for you the product owner, and for the subscribers, this also has the knock-on effect that the subscription engine is easier to develop initially and maintain going forward.?

Still want to go the subscription route? Great! We’ve built loads of subscription based solutions for various industries and we’d love to hear what your challenges are and how we can solve them.?

Contact us so we can start discussing your requirements.?