Tag Archives: recurring billing

What Frequency Works Best For Subscription Business Billing?

Image courtesy of digitalart at FreeDigitalPhotos.net

Image courtesy of digitalart at FreeDigitalPhotos.net

When you are building your subscription business or looking to see if your model is as effective as it could be; you need to check your billing frequency is optimal. There are many different considerations to make when you are looking at the frequency. Here are some of your options with the advantages and disadvantages.

Daily

This is probably one of the extreme options you have for frequency billing. However, it can also be one of the best if you are in a market with a short customer lifespan.

The advantages of this frequency is you have a regular daily income that you can clearly manage and you can see on a day to day basis the net effect of your marketing efforts based just on the income.

The disadvantages of this model could be very serious. For instance, daily invoicing requires significant management of the subscriptions and most auto-billing platforms charge per transaction and sometimes a percentage of the transactions (N.B. Fusebill charges on subscriber per month basis). If you don’t have a significantly high subscription charge, you could find that profit margins are too low for this to be financially feasible.

Weekly

This model is probably still for those who have a short customer lifespan or have regular deliveries of their product (i.e. food, magazines / newspapers). This is more feasible than daily payments but the cost of managing the subscriptions can still be expensive. Also, the regularity of these payments can make the payments seem high to the customer, even if the same rate could be offered on a monthly or yearly basis (i.e $1 a week would be $52 per year). Therefore weekly payments have a higher chance of being cancelled.

On a positive note, customers can often manage weekly payments very effectively so you are likely to have few subscribers default on their payments. Although, the end of the month can be a tricky financial time and this would be when you are likely to have higher defaults.

Fortnightly

Having your billing set so your payments go out every two weeks is an unusual method to set your billing schedule to. One of the biggest problems with this is that not every month would have the same number of payment dates. This can make planning difficult for customers who manage their finances monthly. It can also be hard for you to justify the billing schedule if you have an evenly distributed product (i.e. software) as payments on a month to month basis would be uneven.

A big advantage of this however is that you can distribute your bill processing across a wider range of dates making billing management easier.

Monthly

Probably one of the most commonly used frequencies. Monthly billing is very easy to manage both from your business’ point of view and your subscribers’. There is also the added bonus that you could separate your billing dates into different groups to spread out your workload. For instance you could split your subscribers into four groups; each pay on a different date i.e. 1st of the month, the 10th of the month, the 15th of the month and the last day of the month.

This is a great model for those who are providing a consistent service over the longer periods, like software, publications and membership sites. However, if the size of the payments per month is too high, some customers may be dissuaded from buying your product whereas a weekly schedule would have suited them much better.

Annually

Once a year payments are an extreme case and are often used by businesses that are confident their customer lifespan is significantly long. There are some advantages such as less management is necessary for the payments. This means businesses can offer discounts to tempt new customers into signing up for annual plans.

The problem with this model is your subscribers may forget about renewal and therefore not have the funds available when the time comes. This can lead to you having poor retention. To combat this, ensure you are informing your customer in advance of when their renewal is due.

Conclusion

Having the balance between your customers needs and desires and your own is important when it comes to deciding what frequency your business needs to bill your clients. You also need to consider your product and how often it is delivered when coming up with the billing model. With these thoughts in mind you should come to a conclusion of which billing frequency is best for your business.

Do you need recurring billing and subscription management software? Contact one of our experts at info@fusebill.com, call or check out the Fusebill free trial.

How To Sell The Convenience Of Auto-Renewal

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

When you have a subscription business you need a method to collect the membership fees from your community. You could attempt to do this by sending out a manual invoice at the start of every billing period. This can be expensive and a waste of time that can be put to better use.

Instead, you could use an auto-renewal system to collect payments automatically from your customers. There are several benefits for your business when usin

g an auto-renewal payment scheme. For example:

  • It reduces the amount of administration you and your team have to do.
  • There is a higher retention of subscribers for your business.
  • You know exactly when payments are going to be made by your customers.
  • Reports can be auto-generated to inform you when payments have failed or been cancelled.

While these benefits are a good reason for your business to use an auto-renewal subscription model, your customers will need to be sold as to why they should auto-renew their subscriptions.

The Convenience For Your Customers

The major benefit for your customers is the convenience an auto-renewal subscription model offers. It takes time for your customers to receive, check and pay a manually issued invoice. Having the process automatically completed each period allows them not to be disrupted in their daily lives.

In addition, the process can have financial benefits. As you will not have to process the payments manually you might be able to offer a discount. Energy companies commonly sign up customers to an auto-renewal system by offering a small discount, often between 5 and 10%.

These benefits are especially good if your members are paying a standard flat fee for membership. It allows them to confidently know exactly when and how much the payment will be. This can support their financial planning and management.

Calming The Concerns

One of the major concerns customers may have is cancelling their subscription. It is likely that at some point some of your customer will want to leave the business. They may feel they have to go through significant processes to cancel their subscription including speaking to your customer service team or sending emails to your cancellation team. This may worry them.

In reality the process is much easier. A customer only needs to cancel the payment instructions which exist between them and you. This can be done through their online banking dashboard. This means the payments can be stopped immediately, instead of waiting for your administration team to process the cancellation.

At the same time your online system can be informed immediately and access restricted at the next ‘end of period’. Or if you send out physical products, your distribution team can be informed of the change and they can remove them from the mailing list.

Another benefit for the auto-renewal is your customers will never miss out on a product or period because they have forgotten to make the next payment. This can be particularly useful for physical products such as magazines.

Conclusion

Auto-renewal is one of the most popular methods for subscription businesses to sign up customers. While they have significant benefits for the business, customers are sometimes unaware of the advantages they can gain from signing up to an auto-renewal system. By selling the benefits such as never missing out, the ease of payment and cancellation should they want to leave your business you can increase the uptake of auto-renewals.

This allows you to save costs in manually sending and processing invoices. This can lead you to invest the funds elsewhere in the business or offer your customers a more competitive price.

Do you need recurring billing and subscription management software? Contact one of our experts at info@fusebill.com, call or check out the Fusebill free trial.

How To Turn Your One-Time Fee Business Into A Subscribe-Based Model

"Image courtesy of Stuart Miles / FreeDigitalPhotos.net"

“Image courtesy of Stuart Miles / FreeDigitalPhotos.net”

A subscription based business model has many advantages over a one-time fee model. It offers a stable income allowing you to pre-plan what resources you need on a monthly basis. A subscription based business can also offer your business a larger customer lifetime value while at the same time giving a perception of a lower cost for the product by your customers.

Subscription based businesses can afford to bring in fewer new customers per month and afford to dedicate more time to customer retention activities.

Changing your business from a one-time fee model to that of a subscription based model can seem difficult. However, Adobe has recently done this with their creative suite and while it has had some criticism, many pundits are seeing it as necessary for the company and consumer.

The main issue with this is how your business designs and implements the change. Here is our quick guide how you can switch.

1. Design Your Subscription Product

The first step you need to take is to design your product. If you run a software business this would be an easy decision. Other industries may have to be inventive but usually the subscriptions could allow customers access to resources, tools, guides, advice from your team, etc.

With your decision you should consider how much access to the product the consumer has. You might want to offer different access for different subscription levels. For example, if you have a digital art creator your lowest subscription model could offer 300 stock images to use, while a higher priced option offers 1,000.

If you want to start with one level of subscriber, remember to include some room for improvement later on. You may find customers want more features/access and would be willing to pay extra for it.

2. Choose Your Pricing Level and Billing Method

The price of your subscriptions is very important. You want to create a price point which gives you good revenue while being perceived by the consumer as a bargain. The monthly price should never be the same as a one-off fee, but instead that fee should be collected over the expected life-time of the customer.

For instance, if you sell a product now for $120 and you believe that the lifespan of the customer is 6 months you will want to charge at least $20 per month. You will also want to add a small margin, so the customers who are with your business less than you expected are still paying a significant amount towards that one-time fee valuation.

The next step is to decide how you will collect payments. The best option is to use a product, service or company which allows you to automatically collect membership fees. Many products available will automatically adjust your subscribers’ access should they upgrade, cancel or default on a payment. Ensure you check with your provider whether they offer this.

You’ll need to decide what to do with previous customers. Are you going to leave them with full access, offer them a discount or a subscription for free for a period of time? If they don’t take up your offer on the subscription will you remove access?

You could increase the uptake of the subscription with these clients by offering extra benefits in the subscription model than they currently have with the one-time fee product.

3. Communications And Testing

Create the website and all the online and offline systems to help run your subscription business. This can take minutes or days to implement depending on the software you are using. Bring in all the technical people you can to help ensure the system works flawlessly.

Then you need to create the marketing materials to announce the changes. Remember to sell the benefits of the change rather than the features. There are some generic benefits all subscription based customers can experience:

  • Lower initial and short term costs to gain access to product.
  • Better customer service and support.
  • Instant access to updates and fixes.

At the same time you want to identify a launch date and create a very specific marketing plan to create anticipation to your target audience through email, social media and other advertising channels.

4. Launch

On the launch day remove your one-time product and switch to the subscription based business. Don’t offer your clients any access to your old product to limit confusion.

Conclusion

Although it seems like a difficult proposition, changing from a one-time fee into a subscription based business is a simple and straight forward exercise. The benefits you gain from moving from one model to another can support the sustained growth of your business and offer your customers a great customer experience for a fraction of the cost per month.

Do you need recurring billing and subscription management software? Contact one of our experts at info@fusebill.com, call or check out the Fusebill free trial.

How To Use Comparative Selling To Sell Your Subscription Software

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Before making a purchase, many decision makers like to have a firm grasp of what they are buying. Normally this can involve some kind of interaction with the product. With subscription software this can be difficult. A free trial may be a good way to attract customers, but it might not be the best way to convert those who take up your offer.

Therefore, other methods have to be utilised to encourage your target market to purchase a subscription. Another method is to compare your software. Comparative selling can happen on a subconscious and conscious level for the customer and there are several methods to exploit this effective selling tool.

1. Comparing Price To Everyday Purchases

Your pricing may be very reasonable, but without a tangible product for the customer to see, they may find it hard to value the offer. Comparing the product’s price to common purchases creates an impression of product value in the mind of the customer. A common comparison for a subscription is coffee.

Be careful in your choice and the frequency. Four cups of coffee a month is ideal because many people consume more than that.

2. Original Price Compared To Sale Price

To achieve great sales, stating an original price for a product and then offering a reduced price will entice visitors to convert. Often these new customers are ‘bargain hunters’ who want to find a good deal online. This works so effectively it even outperforms the rule of 9 – that is any price which ends with 9 has a higher conversion rate than that of a price point which is rounded up or down.

Therefore it is important to consider demonstrating a higher starting price and then showing a discounted price, preferably ending with a 9 for double effect.

3. Comparing To Useless Price Point

How you price different subscription plans will greatly affect your customer’s perceived value of your product. This in turn will change how they convince themselves of which plan to purchase. Research by Dan Ariely on the pricing strategy of The Economist shows this to great effect.

In the Economist’s subscription options they had three price points.

Subscription Offer One: A web only subscription at $59

Subscription Offer Two: A print only subscription at $125

Subscription Offer Three: A web and print subscription at $125.

Subscription offers two and three don’t make sense being the same but option three offers more. In the consumer’s mind, the second option becomes a ‘useless’ price point and they would be better off selecting offer three. In the study, option three had a high uptake even though there was a cheaper option available. This is because when faced with this type of scenario, consumers become value seekers rather than bargain hunters and will always seek the most value for their money.

This was further demonstrated in further research. The Economist tested what would happen if they took away option two. In this scenario consumers were more likely to purchase option one as they convinced themselves they didn’t need the upgrade.

Therefore having three options with the second option at the same price point as the most expensive option may increase your revenue.

4. Comparing Compared To Competitors

If you are in a highly competitive market you may be tempted to highlight your services or prices against that of your major rivals. This could work in theory, yet research has shown that at times, lower cost products do not always perform well against higher priced branded products.

This is because there is a consumer perception of value on the branded product. Instead you should concentrate on comparing your product’s features and benefits to that of your competitors. Consumers are more likely to buy a product which has favourable benefits rather than a favourable price.

Conclusion

There are several options when you want to use comparative marketing to convert your customers. The above four options are used regularly by many organisations to sell products and subscriptions. Consider what methods you can exploit in your sales process to increase conversions, income and profits of your subscription based business.

Do you need recurring billing and subscription management software? Contact one of our experts at info@fusebill.com, call or check out the Fusebill free trial.

How To Increase Renewals For Your Subscription Business

"Image courtesy Stuart Miles / FreeDigitalPhotos.net"

“Image courtesy Stuart Miles / FreeDigitalPhotos.net”

Recurring subscribers and renewals could account for 40% or more of your revenue. Ensuring you have a process in place to improve your retention is vital for the financial stability of your business. To do this you must put in place a set of procedures which actively engage and encourage current subscribers to stay with you.

It is estimated that only 21% of all businesses have a sales team whose sole job is to retain clients. Yet this team could be the most cost effective in your entire business. It is far easier to sell to a current or previous customer than it is to sell to a new one.

Therefore, you need to come up with ways to increase the number of current customers who stick with your business. Here are several tips to help you get started.

1. Ensure You Build A Relationship With Your Clients

When you are in the initial stages of selling your product with new customers, you are unlikely to know anything about your prospects. This means that you are often taking guesses at their requirements and desires in order to sell the benefits of your product.

Once they are a customer you can start to learn more about them what they want. This means when it comes to renewals you can heavily focus on your clients’ requirements and therefore improve the retention rate.

Of course one of the biggest ways to build a solid relationship with your customers is to deliver on your original sales promise. By doing this you will find your customers will learn to trust your business.

2. You Are Better Than Your Competitors

At the end of a contract very few customers are unlikely not to need the service or product you are offering, yet they may look for another provider. To avoid losing valuable customers to your competition you need to concentrate on what your competitors are doing and how they are performing.

By keeping an eye on how your competitors are performing you can demonstrate to your customers why it has been a wise choice to be with your business. It also supports why your clients should renew their subscriptions and contracts with your business.

3. Give Special Offers Based On Usage

Every one of your customers is unique. They are likely to use your services or products differently than that of your other customers. If you are able to monitor this you can determine what is really interesting your client and then re-sell them your package based on those observations.

You can take this process up a level and offer a special deal which is tailored around their usage. For instance, phone operators may notice that a customer’s calls make up 82% of their bill whereas SMS messages are worth 10%, with internet usage at 8%. The service provider could therefore offer a deal where their calls are cheaper but the SMS and internet usage are the same or slightly more.

4. Give Discounts Based On Their Length Of Custom

Similar to the above, customers who have been with your company for an extended period of time could be offered a discount for continuing on. Provided you have a sensible discount level the cost can be afforded because it is cheaper to maintain current customers than acquire new ones.

5. Ensure You Are Contacting The Customer Early

One of the biggest failings of businesses is not that they don’t offer the deals or the renewal, but that they don’t do it early enough. Therefore you should always attempt to contact the client at least one month in advance and talk honestly with the client about their renewal.

Catching them early enough will lessen the chance they have searched for an alternative supplier of your services or products.

Renewals are cost effective revenue streams. It costs far less to have an old client renew than acquiring a new client. This strategy does require you to invest the time and energy to create an efficient renewal system, customer service experience and to ensure you deliver on your original sale goals.

Do you need recurring billing and subscription management software? Contact one of our experts at info@fusebill.com, call or check out the Fusebill free trial.

7 Lessons From 7 Subscription-Based Online Businesses

"Image courtesy of Stuart Miles / FreeDigitalPhotos.net"

“Image courtesy of Stuart Miles / FreeDigitalPhotos.net”

There are many advantages to owning and running a subscription based business. However, there are also pitfalls. Here are 7 lessons from 7 subscription based businesses to keep your business moving in the right direction.

1. Remember Your Customer Acquisition Costs (Hubspot)

A subscription based business is excellent for generating revenue on a consistent basis. However you must consider the customer acquisition cost in comparison to your monthly subscription. For instance, if you charge customers $20 for being a member to your site but it costs $50 to acquire in the first month, you have a $30 deficit.

In the long run, if the customer stays for at least three months you’ll make a profit. However, in the first month you are making a loss of $30. For one customer that is nothing, however say you have 1,000 new customers in your first month then you’ll have a $30,000 loss. If you achieve the same results in the next month you’ll have a $40,000 loss. You would eventually breakeven in the fourth month.

This scenario doesn’t count for any other costs either. Therefore you must ensure that you have the capital saved to acquire customers.

2. Consider Your Customer Successes (SalesForce)

Any subscription business depends on the customers renewing their contracts or subscriptions. Therefore your business needs to support the success of your clients and if they see the value of your business and are satisfied with your services they will continue with their membership.

You can then implement a pattern where you cross or upsell to your customers.

3. Get Your Marketing Right (Andrew and Daryl Grant workshop)

If you want people to subscribe to your membership site you have to get the marketing right. There are several options for you to consider with this. Many people think of social media, pay-per-click (PPC), affiliate programs and blogging.

Each method has distinct advantages and disadvantages. Consider which one will be best to communicate with your audience and concentrate on it, with perhaps one or two other methods in a smaller role.

4. Don’t Put Off Until Tomorrow What You Can Do Today (Writers’ Huddle)

Ali Luke has run many membership sites which take a monthly subscription. At first Ali was reluctant to setup a site until confident in the amount of content she had and when she felt ready. However, she states this was a simple mistake.

Her advice is always to start the subscription as soon as possible because you’ll never be fully ready for what awaits you.

5. Price Yourself Right (Blog Mastermind)

You have to carefully consider your pricing point. Certainly you can have a look at your competitors. However this doesn’t always provide you with the full picture. For example, some membership sites can have similar content but charge drastically different monthly fees.

Therefore try testing out a few price points and see what level of conversion you get. The price point is all about what value our customers place on your service.

6. Not actively developing your product in line with market demands (MySpace)

Even though MySpace is free for users, it is still has the same functions of a subscription based business. Therefore we can learn from one of their biggest mistakes: not developing the product to meet customer expectations.

MySpace was one of the biggest social media networks very early on and was even poised at one moment to buy Facebook. However, that deal fell through and Facebook continued to develop in line with what customers wanted. The end result was that users left MySpace never to return and the value of the business has plummeted.

7. Selling to Strangers (http://gihanperera.com)

One of the reasons why subscription sites work is that users trust the subscription site. Strangers however do not have that trust with your business and therefore selling to them is almost pointless. If they do subscribe they are likely to be short-lived.

Therefore ensure you build a relationship up with your clients before you ask them to subscribe to your business.

Owning a subscription based business can be lucrative. You can generate a steady stream of income, create customer loyalty and sell other products and services to your members. However, running a subscription service isn’t always easy. Only by studying the advice from others, can you avoid common mistakes and have a better, more profitable business.

Do you need recurring billing and subscription management software? Contact one of our experts at info@fusebill.com, call or check out the Fusebill free trial.