5 ways you can make a subscription model work for you (Guest Post) » SMEInsider

5 ways you can make a subscription model work for you (Guest Post)

Louis Hall

In industries the world over, companies are moving away from one-off product sales and, increasingly, are competing to launch innovative new subscription-based services. The subscription business model is gathering momentum and has the potential to transform not just established organisations looking to rapidly launch new services or solutions, but also new businesses, eager to develop an agile and flexible customer engagement strategy.

Rather than selling products individually, a subscription provides periodic (e.g. monthly, yearly or seasonal) use or access to a product or service. The subscription-based model benefits suppliers by securing a steady stream of recurring revenue and provides a regular contact point to strengthen the customer relationship, making it easier to cross-sell and up-sell new services.

Technology giants whose brands have become synonymous with innovation, like Spotify, Netflix and Amazon, all understand the value of the subscription business model and are making active use of it to launch exciting new service offerings. It is therefore no surprise that the subscription model is now being widely adopted amongst new businesses that are eager to develop an agile and flexible customer engagement strategy. In addition to a myriad of digital businesses following this approach, we are even seeing a new breed of niche e-commerce start-ups come to the fore by introducing subscription billing models for traditional repeat purchases including everything from razor blades and nappies, to coffee beans and quality wine.

But moving to a subscriptions-based model can also bring challenges to SMEs. As the move to subscriptions gathers pace, markets inevitably become more competitive. If you are a start-up or small business just beginning to roll-out new services it is likely to be difficult to stand out from the crowd. You’ll want to differentiate yourself and find ways of quickly and easily adding new products or services to your portfolio without breaking the bank in the process.

So how can you address the challenge? How can you turn your billing system from a barrier to innovation into an enabler of a successful subscription service-based model? Here we provide some top tips:

1. Make it easy for customers to pay

Before you launch a new business or roll-out a new service, decide on a payment model that is quick and easy for customers to use and gives them the choice and flexibility they need. Depending on business focus and customer mix, you’ll need to decide whether you want to enable them to pay by automated methods such as direct debit or continuous payment authority, or other offline methods such as bank transfer and cheque.

2. Allow customers to tailor their packages

Customers want flexibility, not just attractive prices. Businesses will almost always look for a service to be tailored to their needs in some way. So knowing your customer well and having a flexible way of packaging and pricing your products and services will be key to the long-term success of your subscription model.

3. Put recurring revenue at the heart of your business model

By going down the subscriptions route, you are creating a billing relationship that makes it easy for your customers to buy additional services from you, and less likely that they will buy from someone else. So, make use of the regular contact point you have to create a stronger relationship with your customers, win repeat business and upsell more.

 4. Offer flexible billing 

To make a subscriptions-based model a success you need flexible pricing options. The problem is that traditional on-premise billing systems are typically too expensive to implement or not agile enough to handle this requirement in a timely manner. Cloud billing can be key here, reducing the time taken and cost of setting up new offerings and enabling cash-strapped small businesses to rapidly turn creative ideas into recurring revenue.

5. Don’t leave it too late

As competition hots up in the world of subscription commerce, you need to be continuously innovating to keep yourself ahead of the pack. It’s an urgent need, and arguably particularly so, for small businesses and start-ups needing to differentiate in their first few months of operation. With a cloud billing implementation there’s no upfront cost, and you get new features and enhancements automatically as part of regular software updates, driving greater business agility and the opportunity to continue innovating around new billing and pricing capabilities. In the world of business, long-term success is about finding a winning formula quickly – and that means being able to fail fast; learn from your mistakes and then quickly adapt your offerings to the demands of a dynamic market.

Louis Hall is the CEO of Cerillion Technologies, a UK-based firm that specialises in billing, charging and customer management systems.