In 1943, author and management consultant Peter Drucker conducted a two-year internal scientific analysis of General Motors, one of the biggest corporations at the time. After attending countless board meetings, production and decision-making processes, and other interviews, Drucker published his findings and suggestions in Concept of the Corporation.
The motor company, however, dismissed his suggestions. The company chairman, Alfred Sloan, went as far as to refuse to acknowledge the publication in any way, shape, or form.
While the book was not well-received by General Motors, Drucker’s work—including 38 other books—took a firm hold in the traditional business environment.
One of his most embraced concepts was simplification. After he died at 95 years of age, one obituary wrote, “It was Drucker’s ability to examine complex issues in depth, while also relating them to each other, that had such a strong influence on the study of management.”
In order to step ahead of the competition, you have to simplify processes to maximize efficiencies. Successfully monetizing your products and services depends on keeping all the moving pieces running as efficiently as possible.
“(Innovation) is not knowledge,” Drucker said, “but performance.”
Let’s take a look at how a business can maximize its potential by optimizing monetization processes.
Timely monetization of a market need
It’s no secret that the marketplace is always changing. Businesses move to accommodate the needs of customers, which are also in a constant state of flux.
For example, smart houses were once a concept for science fiction movies, or Lifestyles of the Rich and Famous. Nowadays, that technology has become more affordable, dramatically reducing the economic barrier to devices such as smart hubs.
As those hubs became more affordable, the marketplace quickly identified new niches opened up by smart technology.
Security system businesses adapted or created complementary products such as doorbells and cameras that tie to a smart hub. Today’s doorbell systems securely allow homeowners to see who is at their door. It doesn’t matter if they are in the house or on vacation 1,000 miles away; they can connect with an app on their phone.
Identifying a market need and immediately moving to fill that need is what makes a business successful. These businesses can rapidly respond to create monetization opportunities, quickly turning market openings into cash in just a few months or less.
Rapid monetization ability impacts multiple departments
Creating a market solution quickly is essential, but getting that solution into the marketplace is equally critical. In times gone by, it could take several months to launch a product.
That timeline has rapidly decreased in recent years. If your business is not supported by state-of-the-art systems, your competitor—the one who has agility to get to market quicker—is going to gain an advantage and most of the market share.
Beyond product development, the monetization process usually involves teams from sales, marketing, customer support, and billing.
In the context of a business that invoices customers on a recurring basis, monetization requirements pull together revenue generation components, including:
- order management and fulfillment
- payments
- customer management
- contract negotiation
- revenue recognition
- e-commerce
- the billing solution itself
All these critical components need to work together to yield a cohesive monetization strategy.
A financial system of record for flexible monetization
As all of these components impact the process of monetization, there is potential for conflict. However, there is also a solution that can bring everything together: simplifying the process via the billing component.
Traditionally, billing was a behind-the-scenes operation: an administrative, manual process assigned to back office employees who were siloed and had little to no contact with the customer.
However, with increased customer demand for flexibility in pricing, billing is now a key component of monetization. The transition to current agile and adaptive billing has bridged the gap between the back office departments such as billing and order fulfillment with those in the front office who work more intimately with customers.
The resulting billing system is the powerhouse that helps pull elements such as customer service, the quotation system, sales efforts, contract management, and entitlement administration together. As the real-time revenue processor, this intelligent billing platform often becomes the Single Source of Truth (SSOT) for all the revenue-related data of the business. This SSOT is what all departments can trust and utilize for their singular purposes, whether running reports, generating invoices, or insights into customers’ purchasing habits.
Why is a dynamic billing solution so important? With the emergence of e-commerce and subscription purchases, the sales and billing process becomes much more complex. Working with customers is no longer limited to the sales process. Instead of a one-time interaction, subscription businesses now have customers who use their product on a recurring basis.
The subsequent communication is ongoing and touches many different departments throughout the subscription customer lifecycle.
As a business continues to employ agile monetization tactics—such as adjusting pricing strategies, updating features, and updating product catalogs—adaptive billing empowers the customer to make necessary changes to their subscription through self-service portals (SSPs). This further enhances the user experience (UX).
How exactly does an adaptive billing platform support a scalable monetization strategy? Let’s take a look.
1. Product catalog changes
A business that is looking to rapidly deploy new or enhanced products has to add those new items to their product catalog quickly.
A new product may be a standalone item, or it might be bundled with other products in the catalog to provide purchasing options for customers. Regardless, a significant component of bringing that product to market quickly is a catalog agile enough to accept those changes without taking down the whole system.
That catalog—and any changes that have been made—should be optimized to seamlessly match up with invoices. After all, it would be foolhardy to get customers excited about a sleek, new feature without a way to sell it to them.
If adding a feature means you have to essentially retool your entire billing system, it’s time to look for a more feasible solution before growth is negatively impacted. An adaptive billing platform allows a business to make changes in the product catalog without dragging down the system.
2. Marketing efforts and pricing updates
An essential component of adding a new product is in effectively marketing that item.
This can involve marketing campaigns, or systemized plans of action to promote a new item or feature. Sometimes, that campaign may involve a promotional discount. This gives customers the opportunity to take a test run with your new product without having to make a long-term commitment.
In order to offer a discount, a billing system should be able to take the customer’s information (including a credit card if your business plans to automatically roll into a paid subscription), set up an account for them, and alter the pricing plan to offer a discount or free trial period.
Then, that billing platform should also be able to ‘turn off’ the discount when the trial period is over. If a billing system isn’t robust enough to do this automatically, and your business relies on manual pricing alterations, you may be leaking revenue.
Marketing can also experiment with different prices and pricing structures, whether it’s upselling or cross-selling products and features, or creating different pricing levels, such as tiered or stairstep pricing.
It can be detrimental to the business if your billing platform isn’t able to keep up with evolving billing needs. If your platform can’t handle complex billing transactions, your revenue stream takes a big hit, damaging your scaling efforts.
3. Stemming revenue leaks
Revenue leaks are not exclusive to discounts that are not turned off on time, although any leak is going to cut into your efforts to grow.
Revenue leakage is a significant issue with manual systems, particularly when a recurring charge is overlooked for several billing periods. One invoice that charges a customer less than the agreed-upon price is bad enough; imagine if that undercharge continues over and over again.
Another source of leaks happens when a legacy billing system can’t keep up with payments that are in arrears.
Most modern billing systems employ a strategy to automatically send messages to customers called dunning management. Dunning management can be set to follow up with customers who are in arrears by sending carefully-worded messages to remind them that a payment is either coming due or overdue. Dunning can even proactively notify a customer when the credit card on file is set to expire.
With dunning in place, a business that is monetizing their products can focus on pushing out those new features instead of actively following up with customers who have outstanding invoices.
4. Accurate billing every time, all the time
Your business’s credibility and customer satisfaction are as important as the products you provide.
If your billing department relies on manual billing and makes mistakes, this is going to reflect poorly on your business. One issue with billing problems is in overbilling customers, causing costly chargebacks and refunds. This is on top the hit your credibility takes due to invoice disputes.
Losing a customer in a traditional sales approach is frustrating, but in a recurring billing situation, customer churn means you lose that sale every month for the foreseeable future.
Billing mistakes are not a necessary evil in recurring billing or monetizing efforts. Nimble billing platforms become the financial system of record because they accurately incorporate the most up-to-date product catalogs, pricing structures, and customer data.
5. Employing enhanced customer management
So, your business is employing successful monetizing strategies, bringing products to the marketplace quickly, and bringing new customers in the door.
Attracting new customers and offering updated features sometimes results in rapid growth. That’s great. But a business needs to have a system in place to keep track of both the new customers and current ones, or it is going to quickly become difficult to manage—inhibiting your growth efforts.
A modern, dynamic billing system does not just send out invoices. Businesses can easily add new customers, or track updates with current customers, such any subscription and billing changes.
Billing systems such as Stax Bill also offer easy integration with CRM (customer relationship management) platforms so the information between the two systems can be shared seamlessly.
6. Data integrity yields confidence in decision-making
Where do you go to glean valuable insights from accurate data? Dexterous billing systems have the most up-to-date information, because any changes take place in real-time, whether it is with the customer, a contract, or transactions.
With a strong billing system providing the financial system of record, and the ability to make changes immediately, you can trust the integrity of your data. You don’t need to worry that a salesperson ‘tweaked’ the information in your CRM, because the data in your billing system provides a complete, irrefutable snapshot of the business, whether the person accessing the data is in sales, customer service, or is the CEO.
Because that data is updated immediately, it provides the SSOT that your business requires to make critical decisions. This means that with the data in your billing system, you can access critical reports and metrics, such as monthly recurring revenue (MRR) and the earned and deferred revenue essential for ASC 606 compliance.
With this information, a business can easily capture a true picture of its health, while also arming it with the necessary knowledge to make critical decisions in the future, such as further monetizing strategies.
Business processes and digitized systems continue to evolve in response to the ever-changing market and demands. The result is that more businesses view dynamic billing capabilities as no longer an option, but a necessity.
The esteemed Peter Drucker was not just renowned for simplifying and innovating; he also advocated for change when necessary. In his ‘planned abandonment’ concept, he encouraged looking at specifics within a business, whether they are policies, services, or procedures. If a system is lacking, it just might be time to change it.
In the era of subscription commerce, an adaptive billing system is more than just a backend system. It is a driver of revenue growth. It also provides you with the competitive edge to keep your business agile as you scale rapidly in today’s quickly-evolving marketplace.
