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We live in a subscription billing revolutionSubscription billing is the new business model that is taking the world by storm. Numerous industries are switching from traditional pay-per-use pricing to a subscription pricing business model. For this trend to occur, there has to be a set of major benefits for organizations. So what are these advantages and how could you benefit?

1. Regular Income

When you have a pay-per-use model you can’t expect the same income every month and this can be disruptive to your financial planning.

However, when you have a subscription business, no matter how often you set the payment periods, you can reasonably predict the income of your business from period to period.

This can be perfect for predicting what you can afford to spend on other activities and when you can afford investments for company growth.

 


 

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2. Easier To Provide Costs

When you have a pay-per-use system, you have to estimate costs based on the average usage for your clients.

This can disappoint clients who then receive a higher bill than expected when they use above what the average customer does. With a subscription business, this isn’t a challenge, there is a simple pricing structure that you can apply to all customers and they get to choose what they use and how much it will cost them.

At the same time, it improves your relationships with customers as they know upfront about the costs. The better relationships you have with customers, the longer they will stay with your company and the higher return you will have on your customer acquisition costs.

 

3. Customer Retention Is Easier

In addition to the above benefits, a subscription business is also beneficial because it is perceived to be more work by the customer to leave your services.

Therefore, you have a greater chance of retaining your customer even if a rival organization offers them a more attractive deal.

In theory, the only customers you are likely to lose are those who are unhappy with your services.

Even then, you should still have a chance to turn around the unhappiness. Keeping customers for longer allows you to increase the customer value and the return on investment for the acquisition costs.

 


 

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4. Costs Less To Claim Money Owed

When you have a subscription business you can utilize automated invoicing systems to send invoices to your customers and collect payments.

 

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If you don’t have automated systems, you have to manually issue these invoices to your clients and also monitor payments. This can be highly ineffective and costs a significant amount.

By cutting costs with your invoicing team you can concentrate financial expenditure on other areas of your business that can facilitate company growth or service improvement.

 

5. Easier To Create Resource Needs

When you have a subscription service, you’ll know roughly how much demand there is going to be on your resources at any particular time. This allows you to plan resource allocation so you are only using the resources required.

If you don’t have this ability you can suffer in one of two ways.

Either you are allocating too many resources and they have been wasted, or you are using too few resources which can disappoint customers if they haven’t been provided with the customer service they expected.

It is important to note that customers are influenced more by their experiences than price.

 

Conclusion

Switching to a subscription business can be one of the best decisions you make for you and your company. There are several benefits for an organization by switching to the business model and by becoming a subscription model, you can achieve greater financial stability, facilitate company growth and cut costs.

This will give you long term success.

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