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Traditional Tech Won’t Help New Subscription Billing Models

Jan 20, 2016 | By PaymentsSource

Subscription billing is now mainstream. Savvy consumers are happily paying small monthly subscription fees for their favorite products rather than forking over a big up-front payment.

As traditional billing technology becomes outdated and ineffective, companies need to investigate modern subscription billing services that can help them leverage multiple sales channels, gain a better understanding of customers and maximize revenue. That’s the prescription—or subscription—for success in today’s world of e-commerce.

People are embracing subscriptions for a wide variety of services. For instance, I subscribe to a service called Blue Apron, which delivers a box of groceries to my doorstep once a week. Blue Apron preps the ingredients for a couple of meals each week and then I cook them myself at home. Whoever thought grocery shopping would be a subscription service? It is now.

Consumers have long been willing to pay for video content like cable TV and they are now showing an increasing appetite for online video by subscription. Many said this would never happen—that people are far too accustomed to surfing the internet and viewing video for free—but more and more consumers are paying a nominal fee for video content tailored to their preferences.

Of course, launching a new subscription commerce business is easy for a titan like YouTube, with the massive resources of Google on hand. But smaller enterprises can do it as well—if they have the right billing platform: one that delivers consistent cash flow, high customer retention and sufficient customer lifetime value. Here are three keys to building your own successful subscription service.

Take a multiplatform approach to delivering services and content. E-commerce doesn’t just happen on the PC anymore. Consumers make purchases on their smartphones and, increasingly, on their smart TVs. That means your subscription strategy must accommodate a variety of channels, including the Apple App Store, Google Play and other channels like the Roku player.

At the same time, you need a single, unified view of your customers, however they engage with you. You can achieve this if your billing platform serves as a single system of record for all customer information. In the past, merchants had a unique system for each acquisition channel. But that is no longer tenable. Whether a customer signed up through the Apple store or your website, your customer care team still needs immediate access to that account information. Likewise, your marketing team needs a unified view of all subscribers. Having multiple systems of record produces a fractured view of the customer base, and thus the business.

And as new ecommerce channels become available, you need to be able to incorporate into your billing platform easily. If, for instance, the Internet of Things suddenly brings to market a killer device for people to watch videos on their refrigerator door, you need to be able to quickly add this channel to your billing platform in order to capture all those new customers and still have a consistent view of all the other subscribers.

Acquire a deep thirst for customer insights. If people sign up for your service, how likely are they to churn? And does their likelihood of churn vary depending on the channel through which they have been acquired? Are your Apple subscribers going to have a longer lifetime value than customers who signed up after a Google search? If your billing platform is fractured, you’ll find it nearly impossible to piece together the data you need and get these answers. By contrast, if all your customer data flows through a single billing platform, you can mine valuable information about what’s working for you and what is not. Then you can better tune your business.

Communicate with your customers at the right time. Many subscription businesses automatically contact their customers each and every time there is a payment hiccup. Many merchants incorrectly assume that this gives the cardholder an opportunity to “fix” the payment and keep the subscription active. However, contacting the cardholder may not be the best way to extend the subscription lifetime.

Say, for instance, it’s Christmastime and a loyal customer has just gone on a holiday shopping spree. His credit card is maxed out and, as a result, his subscription renewal is declined when it comes up for renewal in early January. By prodding the customer with an email or a phone call, you’re very likely to induce the subscriber to cancel the subscription. A better option is to put this customer on a “retry” schedule, by which your billing system automatically retries the credit card every five or six days. Once the customer pays down his credit card balance (which most eventually do) his renewal will be approved. You’re happy and your subscriber is unperturbed.

Doug Smith is senior vice president of customer success at Vindicia.

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