Perhaps it’s not as dramatic as the disco backlash in the late 1970s, but numerous consumer sentiment studies suggest that subscribers are growing more frustrated with the number of subscription services and the amount of money they are spending each month on these services. Bango, a mobile payments platform, found that 72% of U.S. subscription consumers believe there are too many services. A Kearney Consumer Institute report found that 40% of consumers are spending more than they realize and want to reduce subscription spending to below $50 a month.
While most of these studies have focused on consumer subscribers, we know anecdotally that in the business-to-business world, companies want more flexibility in their subscription arrangements, with the ability to easily increase and decrease usage as required and pay only for what they need.
Faced with these daunting realities, subscription companies – both B2B and B2C – are feverishly exploring ways to offset increasing frustration among those who believe they are paying too much for too many services and not getting the value expected. Transitioning from simple, fixed monthly fees to usage and consumption-based models is gaining traction as a means to offer some subscription users greater flexibility, more options, and incremental value.
As covered in an earlier blog post, the move to consumption-based subscription models offers more accommodating billing arrangements that have the potential to stave off churn and mass cancellations. But moving from simple subscriptions to usage-based models has implications for subscription suppliers. As the cost certainty of simple subscriptions diminishes, landmines could emerge that, if not navigated properly, could lead to even greater customer defections. Many of these are in the areas of customer service and support.
Enterprises seeking to undertake this transition need to understand that, in this new paradigm, billing and customer care will be inextricably linked. Not only will it be critical to procure the capabilities and technologies to capture usage and accurately invoice for it, but subscription providers must also adopt strategies to manage what will almost certainly become a more engaged and active customer base.
In a simple subscription scenario, where the monthly fee is the same from one month to the next, the subscriber is far less likely to query their invoice or even look at the bill, and even less likely to contact customer care. That can change in a consumption-based model, perhaps dramatically so.
Customers will expect to be able to track usage in real-time and be alerted should usage and charges surpass certain thresholds. There are bound to be more instances of bill shock, where the user receives an invoice for an amount higher than anticipated. As this happens, customer care inquiries will increase dramatically. Lack of preparation for these changes can drain an enterprise of resources and drive subscribers elsewhere.
With this in mind, it is imperative that enterprises pursuing consumption billing models enhance their customer care capabilities and adopt bill shock prevention strategies from the outset. This includes providing the user with a direct line of sight into usage so they can understand their liability at any given point in time. Developing and offering a robust self-care capability will empower users to manage their subscriptions, see where their bill stands at any moment in time, and create alerts to notify them when they are approaching their limit, or when atypical activity, like traveling abroad, could result in unexpected fees being incurred.
Most simple subscription companies do not have the advanced and modernized billing platform needed to manage usage-based subscriptions, and chances are they do not have the requisite capabilities to manage increased customer interactions either. Success in the consumption world will require a dedicated investment in both.
Learn how Aria automates complex, consumption-based billing