Subscription management software is more than just a tool to manage customer subscriptions.
I know that may seem confusing, given its name.
The reality is that it’s an incredibly valuable piece of a business’s tech stack; a revenue and growth-driving engine that can totally transform business operations, profitability, and scalability.
It has the power to recover hundreds of thousands of dollars of annual recurring revenue (ARR), increase profitability by multiple percentage points, free up days’ worth of time spent processing recurring billing, and capitalize on existing customers for a boost in expansion revenue.
Let’s take a look at those game-changing benefits in more detail.
Recover revenue that would otherwise be lost
You’ve gone through all the effort of developing a product, bringing it to market, and getting customers to sign up. All this costs time and money (and likely blood, sweat, and tears), so failing to collect payment is a bit like falling at the final hurdle.
The real sting? Many failed payment customers actually do want to pay you. Failed payments thanks to expired cards, incorrect billing details, or banking errors often go under the radar for a busy AR team in today’s fast-paced world.
This sort of thing is so common, you’ve probably experienced it yourself. According to one study, a whopping 52% of Americans have maxed out their credit card before! Other research shows that insufficient funds are the reason for 53% of recurring payment failures.
When a customer unintentionally ends their subscription (which won’t renew without payment) it’s called involuntary churn. As a source of revenue leakage, this is a real concern for SaaS and subscription-based businesses, resulting in an average loss of about 9% of monthly recurring revenue (MRR).
Luckily, the solution is out there. Data analyzing over 52 million payments showed 32% of failed transactions can be rectified by simply retrying the transaction a few days later.
However, manual dunning management is a minefield and a massive headache when done at scale. It takes up valuable humanpower, it’s time-consuming, and there are processor rules to navigate, like the number and frequency of retries.
Poorly handled retries can also damage customer relationships.
A credit card retry schedule performed by a subscription management system automates this process. It helps subscription businesses recover significant amounts of revenue they’d previously have written off. Plus, the process is often so seamless, the customer doesn’t even realize there was ever a problem.
When On The Map implemented subscription billing software, it clawed back an impressive $600,000 in ARR. Nice!
Run pricing experiments to optimize your pricing strategy
How little ongoing effort SaaS businesses put into their pricing strategy is a hot topic—and for good reason, too. On average, increasing price by a mere 1% translates into an 8. 7% increase in operating profits, according to recent data from consulting firm McKinsey and Co.
It’s widely accepted that optimizing pricing is the most effective revenue generation technique.
“We’ve always taken pricing seriously. I mean, it’s one of the biggest drivers of growth so of course we’re gonna put the time and effort into getting it right.” – Cameron McKay, Process Street CTO
The benefits of constantly optimizing pricing include
- an improved customer experience (more flexible pricing options),
- better-aligned cost-to-value metric, which sends signals about your product’s quality, and
- attracting best-fit customers who contribute more revenue and have a higher lifetime value (LTV).
Despite this, less than half of SaaS businesses (43%) revisit their pricing model more than one time per year. It’s clear there’s a lot of revenue being left on the table in the SaaS industry.
What’s more shocking is that only 6% of them carry out proper pricing research based on their customers, and more than half don’t even test new pricing first!
These businesses are playing a dangerous game, toying with potential backlash from poorly thought-out price changes that could result in damaged brand reputation, high churn, and revenue loss if not well received. Like when Process Street, a modern process and workflow management platform, introduced usage limits to its per-user pricing model. The dramatic result was a conversion rate that dropped through the floor and a scramble to revert it back.
To effectively optimize your pricing, you need to run frequent experiments with various segments of your customer base. A/B testing pricing experiments help you to see whether different price points and billing models work better than what you currently offer (before you roll them out to your entire customer base).
To do this, you’ll need a powerful subscription management solution that lets you split customers into cohorts, monitor each cohort’s subscription lifecycle, and analyze the data using thorough, granular reporting.
Reallocate up to 90% of time spent billing
Juggling spreadsheets and making manual adjustments to subscription plans quickly becomes unfeasible, especially if your business experiences rapid growth. Simply automating your complex invoicing process can drastically reduce your team’s time spent billing.
For example, JustLogin increased its business threefold while reducing time spent on billing by an incredible 90%.
What to do with all that extra time? You can redirect those hours to more strategic growth projects while your billing process runs dependably in the background.
As well as saving your accounting team time, the right subscription management software will also benefit other departments, like customer success and sales.
A subscription management platform enables smoother business operations by providing a single source of truth (SSOT) for customer data and subscription data, reducing the need for confusing interdepartmental communication and unnecessary information requests, and eliminating the risk of human error.
By providing accurate invoicing, automated accounting software also improves customer experience. This should have a positive knock-on effect on customer retention, one of the key metrics for revenue growth.
Remove barriers to purchase
The most effective subscription management systems will let you create hosted registration pages and self-service portals. These pages allow new customers to sign up and existing customers to upgrade plans or purchase add-ons, all without having to speak to a sales rep or customer success (CS) agent.
Firstly, that saves your team valuable time on simple admin-related tasks, like updating customer payment details—which customers are more than capable of doing themselves. In this study by Statista, 88% of respondents said they expect brands to have a self-service portal. Another recent report highlights the increasing demand for self-service, with the vast majority (81%) of people saying they want more self-service options
Introducing a self-service portal gives the customer agency and puts control in their hands. As a result, user experience will improve. It will also help reduce cash flow problems from involuntary churn due to failed payments, as users can easily update their own personal and payment data.
Letting customers manage their own subscriptions, upgrade their plans, and purchase add-ons will also boost expansion revenue—another vital growth metric.
Finally, a good subscription management tool should let you change prices at the customer level and provide catalog flexibility. It should be easy to use and not require any project management training courses. Having a flexible product catalog makes it simple to migrate customers between plans. These functionalities will empower your sales team. The ability to tailor-make quotes and packages can give them the confidence and maneuverability needed to land larger accounts.
Maximize revenue with subscription management tools
We’ve seen how the best subscription management software can:
- accept recurring payments,
- send recurring invoices,
- manage dunning processes,
- automate complex revenue recognition,
- support payment processing through multiple payment gateways, and
- offer growth-aiding subscription analytics.
Additionally, your recurring billing software and subscription platform can integrate seamlessly with the rest of your tech stack.
It’s clear that subscription software features and functionalities go beyond managing subscriptions. Used right, most subscription management software enables your SaaS business to scale and can be the catalyst for astronomical growth.