Subscription Payment

Customers from all walks of life look for ways to simplify their life by subscribing to services or goods that they need on a regular basis. Therefore subscriptions and recurring payments have become part and parcel of our busy lives.

The move to subscription and recurring revenue business models is sweeping both business-to-business (B2B) and business-to-consumer (B2C) sectors. There are striking similarities in why and how subscription models lead to success for companies targeting businesses or consumers as customers. But there are also differences, and those differences show themselves clearly the impact of billing on customer acquisition and retention success.

Both consumers and business buyers have acquired a taste for subscribing to goods and services. Subscriptions offer a degree of convenience and flexibility that outright purchases can’t match. Consumers and businesses aren’t just being given the opportunity to try offerings like software before they buy—they never need to buy.

Subscription models have also enabled innovative and disruptive businesses to emerge, especially in the B2C realm. For example, consumers can subscribe to the monthly delivery of cosmetics samples, which traditionally came free with a purchase. Dozens of companies offer subscriptions to deliveries of specialty food boxes. And consumers who overindulge in edible options can subscribe to online diet coaching. There’s even a moss of the month club for terrarium lovers who want to keep things interesting. B2B and B2C companies enjoy an unprecedented opportunity to grow by letting customers pay for goods and services on a subscription or recurring basis. That doesn’t mean that B2B and B2C companies have the same billing needs.

The wrong solution could actually disrupt a B2C business model, dramatically reducing its revenue potential. B2C companies that offer products by subscription or based on usage must ensure that their approach to billing supports efficient customer acquisition and retention. Otherwise, revenue will suffer. That’s because acquiring and retaining consumers as customers require far more billing agility than winning and keeping business as a customer. In the B2B realm, an actual salesperson and account manager take responsibility for building and maintaining key aspects of the customer relationship. But for B2C offerings, a billing solution plays a central role in winning and retaining customers. An effective billing system makes a substantial difference in the B2C arena, leading to subscriber base increases of as much as 25 percent over time.

B2C Subscriptions Require a New Perspective on Billing:

consumers can now easily subscribe to the regular delivery of food, with organic produce boxes, snack packages, and prepared meals just a click away. It’s easy to try a service and cancel if the offering doesn’t suit the consumer’s lifestyle or taste preferences. With subscriptions, you invite consumers to build long-term relationships with you. But don’t forget the constant retention risk: it’s easy to leave a subscription service.

Fostering customer loyalty is as crucial as the ability to compel interested customers to sign up. In the subscription universe, the goal is to generate recurring revenue by winning and keeping customers. That requires accounting for what it takes to do both. Traditional loyalty builders, such as product quality, loyalty programs, and responsive customer service, still matter. But when it comes to acquiring and retaining subscribers and usage-based customers, billing plays a bigger role than you might think. The right billing platform is crucial to turning a relationship with an interested consumer into recurring revenue. Done correctly, it also generates a higher customer lifetime value to the merchant.

Acquisition: Marketing and Payment Flexibility Fuels Growth:

One of the key differences between B2B and B2C selling is the role of marketing. For many B2B subscription services, marketing generates leads that a salesperson follows. The salesperson reaches out, chases prospects, and negotiates final pricing. In the B2C realm, that would be impractical due to the higher volumes and lower price points. Marketing is sales for many B2C offerings and for high-volume B2B offerings. That’s why arming your marketing team with pricing and promotion flexibility leads to success.

To win subscribers, you need to attract them to your product and provide an appealing offer. You launch campaigns and promotions to achieve that goal. Unfortunately, some billing solutions make it difficult to set up and refine promotions. They may also make it difficult to track ongoing revenue by promotion. Significant IT resources are needed to make modifications, which can take days or weeks. When every tweak to a promotion requires IT resources, your team’s ability to quickly test and improve campaigns— and to generate new promotion ideas is limited. You fail to acquire customers—or lose existing customers—as they jump at promotions offered by more agile competitors. After you’ve attracted customers, they need to be able to pay you. And payment methods are evolving rapidly, especially in consumer markets.

The key to payment method success is obvious: let customers pay with any payment method they choose. B2C companies need a billing platform that accepts virtually every current payment method and proactively enables the acceptance of new payment methods as they emerge. Companies seeking to compete globally need a billing solution that supports billing and communications native to each country and region. In some regions, supporting local currencies is essential, but it’s a competitive advantage—and a customer experience plus—in all regions.

No matter the currency used, tax calculations must comply with local requirements. And customers expect billing-related communications in their language and with references suitable to their locale and currency. But just accepting currency and communicating in the local language is not enough. B2C companies must embrace regionally prevalent payment options. These include increasingly popular regional bank and direct debit methods along with billing through mobile carriers and cash options, such as payments facilitated stores like 7-Eleven and Oxxo. Of course, it’s equally important to accept regionally popular credit, debit, and prepaid cards.

Retention: the Key that Unlocks Higher Revenue:

Subscription business grows through customer acquisition— and retention. The marketing costs involved in attracting new subscribers make it essential that you get maximum value from everyone who signs up for your service. As you retain subscribers longer, your average customer lifetime value increases along with your revenue. To ensure high retention, it’s essential that all of your processes, including billing, help you avoid customer attrition or churn. Churn encompasses both voluntary and involuntary loss of customers.

For most B2C products, it’s as easy to unsubscribe as it is to subscribe. You’re likely to see a high voluntary churn if your products don’t represent good value or if your customer service is poor. Involuntary churn happens when a subscriber wants to keep using your product but is forced to take special action in order to do so. Billing issues are one of the leading causes of involuntary churn— and your billing solution should be able to help prevent it.

Imagine that a subscriber’s credit card expires, or the subscriber has another type of short-term issue with their credit card. When their payment transaction fails, as a result, they get cut off from your services. The subscriber then has to address the cause of the problem themselves, which means that they have to make a conscious decision to remain with your service. Instead, your subscriber just might choose to try a competing service. But what if your billing solution could actually resolve many of the causes of failed transactions automatically without inconveniencing the customer? The subscriber would never involuntarily face the decision to remain with your service or leave.

Conclusion:

To win and keep consumers as subscribers, companies need to ensure their offering delivers value and flexibility. But billing impacts customer acquisition and retention success, too. B2C companies must take consumer preferences and customer experience into account as they choose a billing solution.

Consumers want to try services that offer enticing promotions. They also prefer to pay with their favorite payment methods in their own currency. Most importantly, consumers are more likely to stay with companies that don’t force them to resolve every payment glitch themselves.