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July 30, 2015 | Authored by: Vindicia Team

Best practices for maintaining a lucrative subscription billing model

Subscription billing is a great model, but like any business strategy, it presents some challenges. Subscription models guarantee repeated revenue. On the other hand, recurring payments bring an additional set of issues. Whether you choose freemium, frequent or infrequent subscriptions, there are a number of best practices you need to keep in mind to maintain a successful and growing business.

Identify and monitor metrics
Each business model is unique, but one aspect they all have in common is the necessity of monitoring metrics. Average revenue per user (ARPU), average revenue per paying user (ARPPU), average customer lifetime value (ACLV) and monthly recurring revenue (MRR) are just a few of the metrics that you'll want to keep an eye on, depending on which model you pursue. Track these against customer acquisition costs, and make sure you're achieving return on investment.

Gain insight into customer base and purchase patterns
Understanding customer behavior is key, especially in the subscription space. As a webinar from Elastic Path pointed out, since customers pay for these models over a longer term, they expect a lot from subscription services. Companies can gain insight from behavioral data to make a more seamless customer experience, from purchase to use of the product. 

"Companies need to use behavioral data to make the customer experience as seamless as possible."

Through analytics, business owners have great insight into what customers want, which can help businesses anticipate their needs.

Communicate effectively
Keeping in touch with your customer base is an essential part of maintaining your subscribers, whether it's updating them about new features, remarketing to past subscribers or notifying customers of payment errors. Proper branding and effective communication in your messages can help your customers get excited about your brand, but it also may prevent customers from issuing chargebacks if they're unsure of where a bill came from. All in all, clear and effective communication is key to maintaining a successful subscription business.

Add value to products and services
To keep current customers engaged, you need to keep things engaging for them. Make sure your product is always improving. Subscription services like Spotify and Netflix are popular because they consistently find ways to improve their offerings. For instance, Spotify continues to improve its discovery system, allowing users to browse playlists based on moods and genres. It also generates recommendations based on what customers have previously listened to. A static product is going to lose subscribers over time, and it certainly won't attract new ones. This includes adding different subscription offerings to your catalogue. As your customer base grows, continue to provide more choices so that subscribers can easily switch to another plan that better suits their needs.

Evolve quickly 
The subscription space is growing, but that also means the environment changes quickly. It's important to keep up to date with industry changes or face falling behind. You don't want to share a similar fate to Redbox Instant, which jumped into the market too late to compete with Netflix and didn't have a great business model to boot, as N Screen Media pointed out. As other platforms developed video on demand, Netflix jumped ahead again by offering original programming. In this fast moving space, you need to keep your finger on the pulse of what's next. 

Evolve quickly to achieve growth.

Keep churn at a minimum
One of the biggest challenges of the subscription space is keeping up with outdated card information. When customers cancel a card, it doesn't always occur to them to update the data on every platform. Unfortunately for businesses, this can mean dropped payments. To prevent this problem, incorporate retry logic to recapture some of the failed transactions and make it easy to maintain your subscribers. Not only does this help you reduce churn, it makes things easier for your customers, which is one of the primary tenets of client care.

At it's core, the subscription model puts the customer first. To ensure business growth, you need to continue adding features to engage your customers, keep on top of trends, communicate effectively and make it easy for them to stay customers. 

About Author

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