In the transactional world, billing is pretty simple. A product or service is purchased and the customer is given the bill with the goods or it is sent at a later date, the bill is paid and the relationship ends.
The subscription world works differently because customers pay on a recurring basis usually monthly, quarterly, or annually, under evergreen or fixed terms. Billing becomes a cycle and consequently plays a much larger role than it does with transactions. The impact of this increased role of billing can affect your business negatively, especially if your billing system is not correctly mitigating the effects.
One of the key differences between the transactional (one-time sale) world and the subscription world is the impact billing practices and systems have on your business. Not regulated to customers and revenues, issues caused by billing can seriously hinder your marketing and sales teams.
Impact of Billing on Sales and Marketing
Billing doesn’t just affect your customers; it also affects your business. More often than not, the billing system is a back-end system run by Operations and guarded by Finance. Marketing has lots of ideas to test pricing, launch special promotions, offer discounts and coupons, etc. But they don’t have direct access to the system which restricts their flexibility. This inability to make changes to the billing system is one of marketing’s most difficult obstacles and a common challenge for marketing teams.
Marketing initiatives such as promotions and price testing may seem to some to be a relatively small problem, but consider that the same issues also impact new product introduction and it becomes more serious. Obviously, expansion of your product catalog should not be affected by billing practices.
Another hindrance imposed on Marketing and Sales by billing processes is the inability to access vital information. To do their jobs effectively, they need full and frequent access to data around churn, and customer lifetime value in order to build models to measure per customer profitability, etc., information integral for making successful business decisions.
The third issue is the difficulty surrounding manual price testing. In fact it can be said that flat pricing is often used ONLY because it’s easy. Changes can’t be made quickly, things get broken, short term plans are often never changed back and you end up with customers getting the same service at different prices, which can mean you’re either not making enough, or charging customers too much. Customers become unhappy, Marketing and Sales become frustrated and things quickly fall apart.
Inability to access communication tools can also hinder Marketing. Often, customer communication and management of the customer experience is left to IT by default because they are the only group that has access to the systems that deliver the messaging. Since customer experience is critical for subscription based businesses, Marketing needs to be able to build and test better communication in order to improve customer experiences so the remain customers longer.
Finally, billing processes that don’t allow for account status implementation that links to billing status can become an obstacle difficult for your sales team to maneuver. If your customer can continue to use your service (after a grace period), when they’re no longer paying (for example a credit card has expired), they are likely not going to pay. Even if you are sending reminders, if there is no consequence for non-payment, payment is unlikely. This means Sales hands are tied when it comes to renewals, upselling, add-ons, etc. for what could be a large portion of your customer base.
While the billing process and even the billing system itself can frustrate and impede your marketing and sales team, there are things you can do to mitigate these issues and in fact, many of them can be resolved and even automated just by putting the right billing system in place.
Your billing system should include abilities such as:
- Linking account status to billing status allows you to block account access or limit features to customers who aren’t up to date with payments.
- Features that make price changes and testing easy to implement, monitor, and report on.
- Allowing for pricing using one-time, recurring, usage and volume based plans and the automation of one-time or ongoing discounts, coupons, and free trials.
- Accessibility to customer communication tools so Marketing can take control of this critical function.
- Ability to control marketing campaign timing so Marketing can create and administer coupons for either fixed or percentage based discounts on their schedule without having to wait for backend changes.
- Easy access to real time analytics, metrics, and other information to everyone who needs it. This information includes
- Total Customer Value (TCV)
- Monthly Recurring Revenue (MRR)
- Cash Flow
- Customer Lifetime value
- Customer acquisition rates
- Product / Subscription sales
- Earned Revenues
It’s important these metrics, are intrinsic metrics in the system and are brought up in a way that makes them accessible to marketing people – and that’s separate from the whole “how do I go and collect money from my customers” point of the system.
Billing and billing systems should empower your teams so they can reach reach their goals, not hinder them.