What is Subscription Management?

Subscription Management – An Introduction

Subscription models have risen at an exponential rate in recent years with a growth rate of 99% as of 2021 given how it is a win-win situation for both customers and retailers. Retailers secure long-term recurring revenue and customers save themselves from the hassle of heft one-time fees.

Modern daily life is deeply intertwined with subscription businesses that offer comfort and entertainment sustaining multiple lifestyles. Whether it’s your personal entertainment that is sustained by Netflix, Spotify, Amazon Prime, or Hulu or your professional needs fulfilled by Slack, LinkedIn Premium, or Canva, no aspect of your life is free from subscriptions.

To take it a step further, even your kitchen and your bathroom run on subscriptions. Yes, you read that right. Dollar Shave Club offers subscriptions for various items in your bathroom and meal prep and grocery subscriptions like Uber Eats have got you covered in the kitchen arena.

This is because most organizations have begun to realize the value of building a long-term loyal customer base. It is the best way to recognize recurring revenue and create opportunities for multiple revenue streams from the same brand with different tiers aiming for different demographics.

Thus, companies focus on customer retention rather than customer acquisition; the latter costing 5 times more than the former. As customer retention is the basic driver for growth. But, how exactly do you retain customers, and what roles does subscription management play in that?

Let’s start by understanding what subscription management actually is.

Distinguishing Subscription Management from Recurring Billing

Recurring billing and invoicing are terms thrown around when subscription management is talked about. So, someone unaware of the jargon might confuse the terms for being the same, which couldn’t be farther from the truth.

What Subscription Management Is

Subscription management refers to handling and overseeing subscriptions or recurring services throughout their lifecycle. This entails customer onboarding, billing, renewals, upgrades, downgrades, and cancellations

Effective subscription management involves implementing robust systems and tools to track subscription details, monitor customer behaviour, ensure timely billing and payments, provide personalized offers, and optimize customer retention.

Thus, subscription management solutions streamline and automate these processes, fostering a seamless and positive customer experience while maximizing revenue and reducing churn.

What Subscription Management Is NOT

What is recurring billing & payment processing then? Well, it is definitely not subscription management. Here’s what it is:

Recurring Billing

A ‘bill’  is a printed or written statement of money due for products or services. Recurring billing is a computerised procedure that involves the customer, and the merchant, and a method to track a periodic transaction between the two. At its most basic, it handles invoice accounting for elements such as proration and regional taxes.

Recurring Payment Processing

Recurring billing means charging customers on a regular, pre-defined basis, typically at fixed intervals (e.g., monthly, quarterly, annually). Once the initial payment information is securely stored, subsequent payments are automatically deducted without requiring the customer to take any action, ensuring a seamless and hassle-free experience.
The payment processing aspect of recurring billing involves handling the transactional flow of funds from the customer’s account to the business’s account on a scheduled basis. This requires secure and compliant payment gateways or processors that securely store and process payment information.

A subscription management solution does include an automated payment processor, but it does so much more. It manages your customers’ multiple payments over long periods of time during which they might have had numerous payment periods and even more numerous payment errors and/or instances where they needed changes in their payment plans and features they want to access.

Why is Subscription Management so Essential?

Let’s explore why subscription management is crucial through three typical customer lifecycle scenarios:

1. Customer Registration & On-Boarding
   When a customer signs up, it’s essential to determine if they have enrolled in a trial period. If they are undecided about continuing after the trial, having empowered customer service executives who can extend the trial period becomes vital.
   In the subscription business market, retaining customers after sign-up is as important (if not more) as acquiring them initially.
2. Active Product Usage
   During the customer’s active usage, various billing-related services might be required. Upgrading or downgrading subscriptions, handling mid-cycle changes, and ensuring data accuracy in the System of Record is crucial.
   An automated subscription management system simplifies these processes, keeping accurate records of billing conversations and facilitating smooth interactions with customers.
3. Customer Churn
   When a customer decides to leave, it’s more than just losing a single sale; it’s the loss of their Lifetime Value (LTV) in a recurring billing model.
   Understanding customer requests, handling them effectively, and utilizing subscription management to augment the billing process are crucial in minimizing churn rate.

Recurring billing and subscription management go hand-in-hand, offering automation, intelligence, flexibility, and control. Poorly managed subscriptions erode customer trust and loyalty, leading to disengagement.

However, with a well-implemented subscription management system, you as a business owner, can focus on building strong, positive customer relationships and providing an exceptional experience; making every sign-up the start of a beautiful journey rather than an operational burden.

Secure, responsive, and seamless payment experiences foster customer focus on the value a business provides, enhancing overall success in the recurring business landscape.

More to Read

Feel free to explore more interesting reads on the same nature of business:

• What distinguishes the subscription leaders from the laggards? Some fantastic practical suggestions on how subscription-based businesses might achieve success. Subscription business models work well for some businesses but not so well for others.
• How do you gain all of the advantages of subscription management mentioned here and more? Find more details here: Catalyze subscription workflows with subscription management software.
• Find out how subscription solutions can help in achieving growth through innovation. Because in a competitive landscape where there are more competitors than you can count, it is essential to focus on your unique selling point. Distinguish yourself to attain exponential growth.