Subscriptions programs with recurring payments are ubiquitous in e-commerce for both B2B transactions and direct to consumers. The simple business concept of using subscriptions to bill customers periodically for providing goods or services on an ongoing basis, and collect payments on a recurring basis with multiple online options has become mainstream. This growth has occurred because the concept works for businesses and customers as well.
Technology companies use subscriptions with recurring payments for services and products from SaaS to printer ink. The typical subscription scenario works like this:
- Customer completes subscription application online.
- Pricing options can be usage-based, tiered or one time billing.
- Payment options may include credit cards, ACH, ETF or various fintech providers like PayPal.
- Customer can opt to auto renew with recurring payments or not. 100% auto renew is the goal.
- Company provides services or products on an ongoing basis for the term of the subscription.
The challenge for technology companies using a subscription based business model is to acquire new subscribers and minimize “churn.” Churn is the turnover rate or loss of existing subscribers. Technology companies use marketing techniques and Business Intelligence (“BI”) tools to minimize churn in a number of ways including:
- Maximize the number of subscribers opting to auto renew with special incentives.
- Make auto renew the primary option requiring subscriber to opt out.
- Require auto renew with no choice to opt out.
- Offer customers with expiring subscriptions special offers to renew.
- Use BI tools to analyze subscribers, predict behavior and select options to retain them.
The sheer size of some subscription programs can present difficult technical issues for technology companies. Successful management of subscription programs with recurring payments requires the right BI and communication tools to accomplish the following:
- Seamless integration of subscription programs with internal ERP software and financial reporting systems, and third party providers
- Tools to communicate with subscribers and manage programs
- BI tools to analyze results and predict possible outcomes
The benefits to technology companies of subscriptions with recurring payments far outweigh these challenges. Benefits may include the following:
- Retention of customers. It is usually easier and less expensive to retain customers than acquire new ones.
- Increases cash flow with recurring payments paid in advance
- Recurring payments provide a smoother, more predictable revenue stream.
- Data base of potential customers for new products and services
The benefits of subscription programs with recurring payments for technology companies will ensure the continued use and growth of this business model. To successfully integrate and manage this business model you will need the right software and tools.
The software and tools you need are available from Lockstep Collect, a leader in cloud-based and premise based software solutions with a proven track record of assisting technology companies.
If you would like to learn more about how you can benefit from subscription programs with recurring payments, please contact Lockstep Collect at www.lockstep.io.
