When you think about business functions that impact SaaS revenue, it’s easy to think first of sales, marketing, and maybe even CX.
But what about recurring billing and subscription management? Just like sales and marketing, it’s a public-facing function of your business experienced by all your customers.
Handle your subscription experience well and nobody will think twice about it. Handle it poorly, and you’ll realize that even back-office tasks can also contribute to your retention rates, and even impact your capacity to produce revenue—for better or for worse.
The right subscription management system allows your subscription business to improve dunning, boost the customer lifecycle experience, and add nuance and flexibility to your subscription models. In an industry where businesses live and die on their ability to retain their customers, good online subscription management software is a vital asset.
1. Reduce involuntary churn
Involuntary churn is a recurring revenue killer that happens when a customer who would like to keep using your product is effectively kicked out—usually thanks to a payment misunderstanding. Experts speculate that as much as 40% of churn could be involuntary. Businesses that focus on eliminating involuntary churn and improving recovery can see significant gains in recurring revenue for their subscription services.
On the Map, a subscription business that builds business websites recovers an average of $600,000 annually by using Stax Bill’s suite of collections assurance features. The business was able to rectify failed payments before the customer was even aware of the issue.
Involuntary churn is commonly caused by several factors:
- Outdated payment information. Credit cards expire every three to five years. When a person gets a new card, it can be difficult to remember to update their payment information (especially when the average millennial has 17 active subscriptions). This can result in collection failures that then cause the customer to get booted from your system.
- Insufficient funds. Around 20% of people experience overdrafts on their credit cards. There are many reasons it can happen. They had a major home repair or healthcare bill. Or their paycheck came in a day later than usual because of a banking holiday. They can afford your product, just not on the day you tried to collect payment.
Now, you might be thinking something along the lines of: “Sure, those things are unfortunate. But we are running a business. We can’t work with people who don’t pay their bills.”
That’s a fair enough perspective. But when you boot a well-meaning customer from your network over a mistake, you will most likely lose their business forever.
Subscription management software makes it easy to recover revenue, keep the customer, and maximize your customer lifetime value—all of which are necessary elements of long-term success in the subscription billing industry
Stax Bill features automated credit card updating to replace customers’ payment information when it changes. It also uses staggered automated credit card retries so that you can recover missed payments owing to insufficient funds without bothering the customer.
When all else fails, Stax Bill includes dunning management tools that make it easier to reach out to the customer to recover owed payments.
Replacing customers requires significantly more resources than retaining them. Good subscription management software will make it much easier to eliminate involuntary churn.
2. Customize plans and pricing
Customers—particularly whale accounts—desire flexibility in their plans and pricing. To be competitive, your business needs to be able to meet these demands in real-time.
Unfortunately, legacy billing software often hinders your ability to quickly create custom offers. When it comes time to launch a new product before the competition or entice a big account with a special offer, your developer team often needs to get called in.
Not only does this take them from their real work, but it can also result in several days’ worth of delays. That’s more than enough time for another company to make its move.
Remember, competition is one of the hallmarks of the SaaS industry. Customers often have many options to choose from. And because it only takes a few clicks to cancel a subscription and start a new one, most people won’t hesitate to explore their options. If a customer can’t get the flexibility they want from you, they’ll move on to someplace else.
Some businesses work around this headache by creating special offers in the form of new subscriptions they intend to cancel before the next billing cycle. While this may allow your business to get its offer out quickly, it’s a flawed method. Invoices become confusing and unprofessional. The potential for mistakes is high. It’s easy for an overworked billing department to allow what was meant to be a one-time charge to turn into a recurring bill.
Customers won’t appreciate cluttered, confusing invoices, and they most likely won’t tolerate mistakes. Not to mention the impact such a workaround has on your reporting.
A good subscription management software allows you to update your catalog and make custom offers in seconds. The invoices that get sent out are professional and straightforward, and the risk of error becomes almost non-existent.
3. Empower your customers
Around 60% of customers report preferring self-service modules for performing simple tasks. This could include anything like signing up for a new account, modifying an existing one, and so on. Basically, they remove transactional barriers.
Imagine you’re a customer interested in implementing a new SaaS product. You’ve found a service that you’re interested in. However, as you peruse the website, you realize that you’ll have to contact sales to initiate your contract.
The line is busy.
You plan on waiting a few minutes and then checking in again. But as you sit there not getting much done, a thought occurs to you: isn’t there another brand out there that offers a similar product?
The goal should be to make it as easy as possible for people to opt in. Once they become customers, the objective becomes making it easy for them to stay. About 75% of customers say that quick response times are of the most importance when it comes to customer service.
According to a different customer survey, 67% of respondents will end a call in frustration if they’re having a hard time reaching a rep, while 78% have backed out of a transaction altogether after a bad encounter with customer service.
Self-service portals and easy-to-use payment gateways make it easier to give your customers the experience they expect and deserve by allowing them to handle small things themselves, giving customer service more time to tackle the bigger things.
The right subscription management software can provide hosted self-service modules that boost retention by improving the customer experience.
SaaS subscription management software gives you every advantage
As Brian Balfore, the founder and CEO of Forge put it, “If your retention is poor, nothing else matters.”
Great sales without strong retention won’t get you anywhere. There are lots of ways to improve your churn rate, but few are quite as straightforward or turnkey as investing in the right tools.
Good subscription management software reduces involuntary churn, strengthens your flexibility, and makes it easier for the customer to get what they want. In an industry as competitive as SaaS, these are vital advantages not to be taken lightly.
