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February 1, 2017 | Authored by: Vindicia Team

Subscription billing best practices

Shifting consumer preferences, including mobile payment options, views on "negative option" subscriptions and more, have been shaping customer expectations of subscription billing lately. Businesses must make sure their methods align with these changing attitudes to maintain satisfied customers. Here's a look at the ideas that should guide your business moving forward:

Offer multiple payment methods

Research from The Pew Charitable Trusts found 46 percent of American adults have used mobile payments, mostly to make purchases through apps or mobile web browsers. Apple Pay adoption is up, according to PYMNTS.com, and USAA recently made Samsung Pay available to its customers. Still, even with these new options, traditional payment forms like debit, credit and ACH remain popular among many consumers.

A company's best option is to partner with a subscription management service that accepts multiple payment types. This gives consumers the freedom to choose which method is best for their lifestyle. Limiting your subscription billing payment options will inevitably exclude or discourage potential customers. What's more, offering various payment options lets you target customers around the world. Preferences vary by region - for example, according to Entrepreneur, credit and debit cards still dominate in the U.K., but mobile payments are the method of choice in Africa.

A/B test customer preferences and pain points

Customer satisfaction has always been a primary selling point for B2C firms, but as more companies adopt a subscription management model, your attention to detail can make or break your retention rates. Every aspect of your business must be designed for a seamless experience - from sign up to pricing options to cancellation. The best way to pinpoint solutions that your customers find most agreeable is with A/B testing, which reveals the minute details that make or break your profits. For example, according to an Optimizely case study, online retailer Fab used A/B testing to choose between two designs for its product pages. Although the differences between the options were minimal, the winning result lead to a 49 percent increase in the number of customers who added a product to their shopping cart.

Be clear about your subscription management conditions

Unfortunately, many subscription services made news this year for business practices that frustrated their customers. Fabletics, an activewear company by Kate Hudson, received widespread attention after a Buzzfeed News report revealed the extent to which its parent company, JustFab, engaged in what consumers called deceptive business practices. Many online shoppers bought Fabletics products assuming they were making a one-time purchase but ended up signed-on for a subscription service.

Although the report first broke in September 2015, it seems other services didn't take note. In January 2016, Business Insider reported lingerie startup Adore Me used tactics similar to JustFab's, engaging in alluring marketing to allegedly trick consumers into signing up for subscriptions. Then, in October, Gizmodo published several complaints filed with the Federal Trade Commission against Honest Company, many of which state that consumers were unaware they agreed to a subscription in the first place.

"Your business runs the risk of chargebacks without clear terms."

Regardless of how your business feels about its subscription management terms and conditions - each of the aforementioned companies claimed they made their terms clear - these details must be simple for your customers to understand. If not, your company could be accused of using deceptive practices, and you run the risk of chargebacks when customers are billed for a service they didn't anticipate.

Reconsider negative option billing

JustFab, Adore Me and Honest Company were also criticized for their negative option billing practices, where customers were automatically charged unless they expressly stated they didn't want the service for the upcoming billing cycle. Comcast recently came under fire for the same tactic, incurring a $2.3 million fine from the Federal Communications Commission. According to the Wall Street Journal, FCC regulations prohibit negative option billing.

The practice isn't necessarily a bad thing. When used effectively, negative option billing ensures customers have continuous access to the services they want. However, for publishers, subscription boxes and other companies where consumers choose a physical product each cycle - as opposed to getting continuous use of a service like OTT content or SaaS products - negative option billing sometimes feels like a scam. Consumers don't want the burden of opting out for the month - they'd rather take the opposite approach and have to opt in. Like questionable sign-up practices, negative option billing risks increased chargebacks and decreased customer satisfaction.

Making sure your company adheres to subscription billing best practices isn't an easy feat, especially as consumer expectations are sharper than ever. Still, as competition increases, going over your processes is a necessary step to ensure your company doesn't fall to the competition.

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