Last modified: 28. February 2018
In the first two parts of our growth strategies series, we discussed developing a solid foundation for your online store and expanding into global markets. In this post, I want to cover subscriptions and recurring billing as an effective way to attract, nurture and retain customer relationships.
In order to compete in today’s market, it is important to be on the lookout for consumer trends and remain agile in your business model. Digital disruption has changed the game—there has been a major change in the way people purchase and consume goods. In the software industry, for example, there has been a shift away from perpetual licenses to time-based subscriptions and renewal purchasing. To stay relevant and future-proof your business in this fast-changing market, you will need to constantly evolve your product offering and implement different monetization models.
Though subscription-service models provide an invaluable constant connection with customers, they can also put your business at risk for uncontrolled customer churn rates. Paying attention to even the small optimizations you can make to increase customer retention and keep churn rates low will be critical in your success as a subscription business.
There are two basic subscription models to consider:
- Standard renewals: Enable subscribers to set up a recurring payment for a fixed period of entitlement, with options to upgrade, downgrade and change services during the subscription cycle.
- Flexible term renewals: Flexible term renewals offer subscribers a more flexible model with variable pricing based on commitment terms and billing scheduling.
Before you decide on the recurring billing model that makes sense for your business, make sure you implement these strategies:
- Think about subscriptions as a relationship strategy. Forward-thinking business leaders are shifting their attention away from customer acquisition to focus more on customer retention. To keep customers happy and subscribed to your service, you have to find the right balance of price and value. If you can deliver ongoing value and nurture their relationship between your customers and your brand over time, you’ll thrive in the subscription economy.
- Consider how your product can evolve to support or become a service. Adaptability is crucial as subscriptions tear down the walls between products and services. Innovative companies are creating subscription-based, experience-driven service models for everything under the sun, so don’t let your product hold you back.
- Think about the buyer psychology. Subscriptions should make life easier on the buyer, not more complicated. To be successful, the subscription needs to offer ongoing value to the end user that is pleasant and consistent. Access to the product or service needs to be seamless, with simplicity in delivery and adaptability.
- Fine tune your infrastructure. The implications of making the switch from one-time payments to recurring billing cycles is not to be underestimated. New technology, business processes and revenue management practices are needed to support a shift. You need a technology partner who can support subscriptions and recurring billing models, with advanced payment technology to optimize the shopper experience and reduce churn associated with unsuccessful payment authorization.
Experts are confident that the future will continue to trend toward subscriptions and away from ownership, with a greater emphasis on service and experience. As technology continues to innovate and the market changes, businesses will either sink or swim when adapting to their preferences. Now is the time to prepare your business to deliver customer choice with meaningful experiences and value-added services that lock in loyalty for years to come.
Make the move to a subscription model with MyCommerce.
We’re heading to SUBCOM East, March 12-13 in New York. If you’re attending, we’d love to discuss how you can renew your thinking about a subscription offering. To schedule a 15 minute meeting, email email@example.com.