By Mike Morini
I’m noticing a profound shift in the way leading companies are transforming the traditional boundaries of billing. Where billing was once focused on transactions, I’m seeing businesses increasingly focus on using subscription-billing systems to drive ongoing, profitable and satisfying customer relationships.
When viewed through the lens of the current on-demand, subscription environment driving both B2C and B2B markets today, successful billing systems are no longer just about soliciting funds for goods or services. Many companies’ billing systems are being used to manage entitlement of services in real-time, encourage repeat buying, reduce costs and ultimately automate scalable growth.
It is no secret that investors, boards of directors and analysts greatly favor and reward businesses with recurring revenue models. That’s because there are so many advantages to the model: predictable revenue streams, the ability to scale revenues with costs, lower sales costs and the ability to bundle products. But more importantly, recurring revenue models align a business to the way consumers and corporations want to buy.
While a recurring revenue model has great upside for a business, creating a billing system to support different kinds of subscriptions can quickly get very complex. Even the simplest online, one-time transaction gets complicated when considering doing business with buyers overseas, with different laws, currencies, exchange rates, taxes and support issues. The complexity grows even greater with flat-rate and variable-rate recurring transactions, as issues arise around provisioning, usage and rates.
Many companies fail to execute subscription-billing models that foster enduring customer relationships because they build their businesses on existing e-commerce and accounting systems. These systems have limited flexibility because they’re designed to fit one-time purchases. Accounting systems are designed to look at past transactions to represent the financial condition of a business. Flexible subscription billing systems, on the other hand, are real-time and allow customers to interact whenever they would like to fulfill purchases, change plans and request support.
E-commerce platforms are designed to handle credit card transactions or other electronic payment methods. They simply don’t have the flexibility or the scalability of billing systems to sign up customers, turn on services, track usage or easily manage customer disputes. Companies that try to shoe horn accounting systems and e-commerce platforms into their subscription model find that the only way to resolve problems is through manual intervention, which will never scale, is prone to error and rarely compliant.
That’s why leading companies are choosing to build rock-solid subscription billing models by focusing on recurring customer relationships rather than just recurring transactions. E-commerce platforms aren’t built for this level of interactivity. The continual touching of customers is the source of value for on-demand businesses, for both the vendor and the customer.
An enterprise-class recurring billing system is designed to manage and automate the entire subscriber life cycle, enabling customer acquisition, product and service delivery, management and rating of usage, financial interactions and customer management. Companies with billing systems that build relationships can design improved customer experiences and make continual adjustments based on their customers’ needs and the needs of their businesses.
For a complete overview of subscription billing and its key drivers download a complimentary copy of “Subscription Billing for Dummies,” a special edition e-book about navigating the many aspects of rethinking your business and billing strategy.
I’d really enjoy learning whether your company is focusing on customer relationships rather than transactions in your billing model and how that’s working for you. I expect our readers would like to hear about this subject as well, so send your comments and we’ll share your insights!