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September 29, 2015 | Authored by: Vindicia Team

3 challenges and solutions for companies that use subscription billing

The subscription business model is a great way to sell everything from content and software to physical goods. While the business model has proven itself successful, there are a number of challenges to consider before getting started.

1. Churn

Churn is the term used to describe the number of customers who sign up and then cancel their subscriptions. It is expressed through an annual percentage rate. A high churn rate means the business has customer retention issues. Acquiring new customers is important, but it won't have as large of an effect on a business's revenue if the churn rate is high. Say, on average, 40 percent of a business's customers leave after one year. That means it would have to acquire more than that every year to expand.

The solution to this challenge is to focus on customer retention. A business suffering from a high churn rate needs to offer its customers the best products and services possible. It also needs to improve customer service and recurring billing solutions. By utilizing a reliable subscription billing solution that can handle new promotions, businesses can ensure customers are happy and that they keep coming back.

2. Growth

Growth is usually a good thing, but it can cause some problems. As a business grows, it can be difficult to ensure customers still receive high-quality products and services. The technology and personnel that is currently sufficient likely won't be after some success. That's why it's important to focus on scalable technology from the beginning. If the technology is in place originally, customers won't notice any issues resulting from expansion, eliminating potential situations that can negatively affect customer retention. Scalable technology ensures that customers stay happy with a business's offerings.

The same goes for seasonal growth. If a business has large surges in the amount of business they conduct during the holidays, it needs to make sure a subscription billing solution that can expand and contract as needed is in place.

"Providing customers with the customized options they want means you need technology that is flexible and fast."

3. Flexibility and speed

There are a number of ways to customize subscription offerings. Unfortunately, providing options makes running the business more complex, especially when it comes to billing. Providing customers with the customized options they want means a business needs to have technology that is flexible and fast. Try to find a subscription billing software that can offer monthly, quarterly and annual subscriptions. It should also accommodate automatic payments from a number of different methods, such as credit and debit cards, direct debit and other electronic payment methods.

While payments need to be flexible and fast, they also should be secure. Find out what security measures are in place before utilizing a recurring billing solution. The last thing you want is for important customer payment information to be compromised.

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Vindicia Team

Vindicia Team

We value our subject matter experts and the insights each of them brings to the table. We want to encourage more thought leaders to come together and share their industry knowledge through our blog. Think you have something interesting to contribute as a guest blogger? Contact us at info@vindicia.com