This is part two of a six-part series explaining why billing, as commonly practiced, is broken, why a more comprehensive monetization strategy is necessary for future success, and how to prosperously make the transition from billing to monetization.
Part One: Those That Monetize Will Thrive focused on today’s changing market economy and the necessity of a comprehensive monetization strategy for success. In part two, we focus on signs that your existing billing system is broken.
Five Signs Your Billing System Is Broken
In today’s recurring revenue business, getting monetization right starts with your billing system.
But if you leave the world of quote-to-cash, one of the first things you’ll likely discover is that your current system isn’t flexible enough to take advantage of a recurring revenue model. Legacy billing systems tend to be one-trick ponies – reasonably good at invoicing orders, but not providing much help in enabling the myriad interactions that make up a customer relationship. A successful monetization strategy requires a system that can manage those interactions, from cross-sell/upsell to customer communications to simply updating personal data.
How do you know if your billing system measures up to the monetization needs of your business? Here are five telltale signs that your billing processes and systems are broken. How many of these are true of your business?
Sign #1 – Your view of your customers is fragmented
The foundational principle of a recurring revenue business is that you must know your customers – their preferences, history, etc. That task becomes more difficult when customer data is spread across a half dozen platforms (CRM, Billing, AR, Provisioning, CSR, Fulfillment, etc.), with no centralized customer view and no orchestration between systems. As a result, your data is fragmented – spread across multiple systems and possibly out-of-synch from system to system.
The problem with data fragmentation is that it tends to result in a fragmented customer experience. Customers experience provisioning and billing errors, customer account views aren’t up-to-date, and the overall customer experience fails to meet expectations. Data fragmentation is the number one depressor of customer satisfaction and a sure sign that billing is broken.
Sign #2 – Your competitors get to market with new offerings faster than you
You see an opportunity to go to market with a new offering that will undercut your competitor and grab new market share. But there’s a problem – your billing system is standing in the way. Many legacy billing systems actually require intervention from IT or engineering to implement new products, bundles, and pricing, instead of allowing the business to easily manage these attributes. The change process becomes a bottleneck, and your competitor gets to market first.
Speed to market and flexibility are basic table stakes in the new economy. Product cycles are shrinking, and the opportunity cost of not being first to market is potentially devastating. If your competitors are beating you to market, is your billing system part of the reason?
Sign #3 – Billing constrains the services and pricing you can offer
Worse than being slow to market is not being able to go to market at all. For example, if your line of business determines it can steal market share from a competitor by going to market with a tiered usage pricing structure with a minimum monthly charge, your billing system should be able to support it. But what if it can’t? You’ll miss the opportunity all together.
Many traditional billing systems do not provide the basic functionality – subscriptions, usage aggregation, tiered pricing, discounting, promotions, proration, etc. – required to monetize recurring revenue products. Is your billing system denying you the flexibility you need to be competitive in ever-changing markets?
Sign #4 – Your customers tell you that you have a billing problem
They often won’t come right out and say it, but your customers will tell you when there’s a billing problem. The ways they’ll tell you can be devastating to your business. If you’re lucky, a customer will call customer service to get the issue resolved. Those calls are expensive, but not as expensive as customer churn. Some customers will just get fed up and run to the competition, especially if problems are recurring. Some of those that leave will tweet to 8,000 of their closest friends about why they’re leaving.
Signs to watch for include an increased number of customer service calls related to billing and provisioning, negative comments on social media, and increased customer churn.
Sign #5 – Revenue leakage (but no one knows how large the issue really is)
Revenue leakage is a simple problem – either you’re giving product away, or you’re charging the wrong amount. It’s also hard to measure. Ask 10 CFOs if their companies have revenue leakage issues, and you’ll get 10 ‘yes’ answers. Ask how much leakage, and you’ll see 10 sets of shrugging shoulders.
Revenue leakage is ultimately a data problem, most often the result of a disconnect between the sales process, billing and entitlements. Entitlements might be out of synch with billing, usage data might not make it to billing, pricing might not match contracts, etc. The more silo’d your systems – the more likely you’ll see leakage. Whatever the form of leakage, and however much you’re leaking, you can’t afford it.
Billing and ERP
One last thought. There’s a saying in New England that, “you can’t get there from here”, meaning something like, “it’s extremely complicated and you’re going to get lost somewhere along the way, so I’m not even going to bother telling you how to do it”. That pretty much sums up billing usage (or any other recurring model) through a traditional ERP platform. That’s not what those systems were designed for, and you just can’t get there from here. Consider yourself warned.
The signs of a broken billing system are clear. How many do you see in your business? And how will you respond?
Finding the right monetization solution begins with taking inventory of capabilities and gaps in your current revenue management solutions. We’ll talk about this process in our next installment.