A product manager in a media company contacted us recently inquiring about our subscription service. He was frustrated that his IT team told him that it would take months to add new products to a catalog to sell and yet the product and marketing managers were not even sure of the best way to sell this new service. As you could imagine, the IT team was reluctant to start any additions to their existing billing system until the commercial team had decided exactly how to sell the products. The commerce team was under pressure to release a new media service to compete with a recently launched competitive offering.
Once we showed the commercial team how quickly new products & services could be added to the system in different currencies and languages and then how quickly we could bundle these services into subscriptions, everyone was excited. We were introduced to other some other teams to show them what was possible. However that excitement was short-lived when the finance manager claimed that they sell annual subscriptions already and their current invoicing system already sends out recurring invoices. There was confusion within the teams.
It appears that the terms ‘Recurring Invoicing’ & ‘Subscription Management’ are interchangeable. I thought perhaps the best way to explain the difference was to show them the difference. The finance manager offered to demonstrate how their system could invoice their existing subscriptions. I was surprised to see the options available in their popular finance system. To summarize, you select the first bill date, the billing interval (monthly, quarterly or annually), choose the bill day of the month, set the final expiring date, and what the line item charges would be. That’s it. So it seems recurring invoicing is certainly possible in most current invoicing systems. In this case however, the client could not do actual usage billing. The best that they could do was to create a line item called ‘Video (Sport)’ or ‘Video (Movies)’ or ‘Video (TV)’ and charge a nominal fee for an all-you-can-eat consumption between billing periods, but they couldn’t charge a tiered based discount/fee for the consumption of video time, even though their IT team certainly collected it. Strike 1.
The marketing team then wanted to explore how a discounted offer for consumers to prepay for multiple months would be billed using the current system, and how would the billing system cope if those customers up-graded/cross-graded/down-graded their subscription during that period even after they had already pre-paid. It couldn’t. It would be a manually calculated adjustment. Strike 2.
Finally, with the uncertainty of market success of their new services, the marketing team wanted to know how the existing billing system would cope with a B2B offer for a 3 month trial at 50% discount and then roll over those premium business customers onto a full paying plan. Hmmmm….the billing team had to set up a recurring invoice with 50% discount for 3 months and another recurring invoice starting in 3 months’ time for the following 12 months. However they warned that they would need to be notified if anything changed since manual intervention would be required to correct/adjust anything. “But what if 500 business prospects sign up to our 3 month discount trial? And what if we want to tweak the prices of our offerings during that period?” one marketing rep said. Hmmmm. “Well we’d have to get some more resources in to cope with that” replied the billing administrator. Strike 3.
It dawned on this media team that ‘Recurring Invoicing’ is not the same as ‘Subscription Management’.
This is just a few ways that the new era of subscription based billing systems differ from legacy billing systems. Business is changing….perhaps your billing system will need to as well.
Just learning about subscription billing? Download the new Subscription Billing for Dummies book and learn more. Are you concerned about buying the right subscription commerce solution for your company? Consider downloading the Six Key Buying Considerations e-Paper and make an educated decision on the future of your recurring revenue offering.