Challenges Of Recurring Revenue And The SaaS Business’ Growth

Businesses are interacting and interlinking globally through subscription-based supply-demand chains. The importance of subscription billing is grown manifold for SaaS companies because it is the best way to charge for software products and services that people need recurrently.

Certainly, recurring billing is a way to earn through multiple revenue streams. However, do you think establishing a recurring revenue stream is an easy task?

It is absolutely not. The need for innovations is the norm in the subscription business market and the emergence of novel challenges is growing more than ever. Utilizing your SaaS subscription management software to overcome these challenges is the next phase, but first, you need to identify these challenges.

We are putting our effort to enlighten you about some of those challenges that almost all SaaS subscription-based businesses face. Read them. Beat them. And continue improving your revenue stream.

Also Read: AI and SaaS for Revenue Growth—Follow Our 7-Steps Guide to Automate End-to-End Subscription Management for Your Business

Selecting a Subscription Pricing Model

Businesses as of their nature use different business models. Basically, there are two types of pricing models that most businesses use. The first one is flat-rate pricing and the second one is usage-based pricing. Two of them can be combined to design a hybrid model if it brings more recurring revenue to the system.

But the point to focus on is when does a pricing model become a challenge to business growth and recurring revenue generation.

Each pricing model has its own pros and cons. For example, the pay-as-you-go pricing model does not offer the perk of predictive revenue. According to this model, the subscriber stays with you as long as he wants, making it highly difficult to predict anything about customer retention which is a source of recurring revenue.

You have to be clear-headed while choosing and implementing the pricing model so that it may not become a hurdle for you.

Also Read: The Price Is Right—A 2020 Basic Guide Of SaaS Usage-Based Pricing Model, Advantages, Challenges, & Solution

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Offering Miscellaneous Plan Charges, and Associated Discounts & Coupons

All subscription business companies offer their customers different subscription plans. Customers are given the feasibility to switch from one plan to the other as per their needs. Some companies charge their customers when they switch their subscription plans—proration. It becomes a source of revenue for the business but a challenge as well. For example, if a customer switched from one plan to the next several times, it will be difficult even for the automated system to track his changes and calculate the amount that changes with the subscription plan.

Discounts and coupons are also effective to increase customer retention and attract quality leads, however, generating accurate invoices considering the discounts and coupons is not easy. The mathematical formulas working behind your SaaS subscription billing software can calculate the bill accurately. But sometimes customization is required when you need to calculate subscription charges along with discounts.

The difficulty caused because of extra charges, discounts, and coupons cause imbalances in the cash flow & revenue stream.

Cross-Selling & Up-Selling

Cross-selling a SaaS product or service means you offer your customers to purchase some other services as well. For example, many SaaS customers purchase the add-on.

Up-selling on the other hand is a strategy to offer customers something lucrative enough that will add more value in their real purchase.

What you need to understand is both cross-selling and up-selling are adopted when you want to increase the revenue. No doubt, they are effective but only if you manage them properly. For example, the products and services that you offer to the customer to up-sell and cross-sell are perfect but your poor marketing campaigns and programs will not help you earn the targeted amount.

Price Improvisation

Whether it is a SaaS subscription company or an industry in the real world, all businesses need to improvise price with time. You should change prices and pricing models with time but never forget about your customers because they are the ones who have to pay. You should consult with the experts of your sales and marketing team before you make any changes in the pricing.

The strategy of competitors should also be monitored when you make any changes in the price. SaaS subscription analytics help you in recognizing certain sales and purchase trends. They play role in deciding the right price for your SaaS services or product.

Also Read: Overpricing Can Turn the Subscription Business Upside Down—Get Your SaaS Pricing Right!

Facilitating with Freemiums & Free Trials

Entrepreneurs and even the established subscription business companies offer freemiums and free trials for they want to increase their customer base. You will probably think that what you offer as free cannot be part of your revenue earning strategy, but it is wrong. The long-term benefit that SaaS companies target by offering freemiums and free trials is to increase the customer base and business growth.

Now that the work on the growth of the customer base is complete, price improvisation is the phase that helps in retaining the customer. The strategy of offering freemiums and free trials can be difficult to manage.

Also Read: Psychological Aspects to Know to Level Up The Recurring Billing with Free Trials And Freemium

How to Beat These Challenges

Many challenges that SaaS subscription businesses face can be handled if you start working on the utilization of artificial intelligence technological advancements. It provides you with powerful features and tools that you can use to fight not only the above-mentioned challenges but many others and earn more revenue. SaaS recurring billing, payments, and revenue management systems based on AI perform to provide you with useful business insights that can help in billing and price improvisation.