What is Subscription Billing?

Be part of the Subscription Economy

If you’re wondering if recurring payments and subscription billing are right for your business, consider this: How often do you think of your business as a one-off sale?

Hopefully never. Sustainable business owners can recognize the difference between making a sale and building ongoing relationships with customers. What’s the difference?

Customer retention.
Regardless of how awesome your service may be, no one wants to give up their hard-earned cash. So, why make payments harder than they need to be?

While a lackluster payments system might not be driving customers away from your unique business offerings, a great payments system is an added incentive and can help drive customer retention.

One way many businesses are building long-term customer relationships nowadays is by offering their customers subscriptions. Subscriptions are a win-win for both businesses and consumers: businesses get a steady stream of revenue, while consumers enjoy frictionless billing on a recurring basis for ongoing products or services that bring them value.

Recurring payments and subscription billing technology keeps customers and merchants connected. At the same time, it allows businesses that offer seamless subscriptions to spend more time on delivering valuable products and services, and less time managing a broken payments system.

Defining subscription billing and recurring payments
Subscription billing and recurring payments exist hand-in-hand. When a customer signs up for an account, they agree to provide regular payments for uninterrupted access to a service. Customers are able to sign up once, and have their accounts billed automatically, whether annually, monthly, or otherwise.

Let’s break that down.

Recurring payments
Recurring payments follow a business model in which customers and merchants engage in an ongoing relationship, rather than a one-time purchase. Customers enter their billing information once and grant the merchant permission to charge them at an agreed-upon cost and frequency.

Subscription billing
Subscription billing, by association with recurring payments, is the automatic, regular billing process that occurs after a customer signs up to use a service. This could involve a monthly invoice for subscribing to a magazine, streaming service, SaaS product, “box of the month,” or other similar recurring services. Customers are charged on a regular basis but have the option to cancel at any time.

On the client's end, rather than being periodically hounded for payment, the owed amount is automatically transferred from their account to the business’. The client is issued a receipt, but otherwise, the transaction is quiet.

How does a subscription service work?
While the payments process is quick and simplistic from the customer’s viewpoint, there are a few behind-the-scenes steps involved:

  • A customer chooses their preferred payment plan and payment method
  • The merchant receives the order info and uses a service like Kugamon RevOps to manage subscription billing
  • Kugamon RevOps handles the payment from there. We store the credit card information securely and connect the payment request to the gateway, processor, card association, and issuer
  • The customer is billed and issued regular statements

What are the benefits of subscription billing?
A recurring payments business model has many benefits for both merchants and customers.

1. Minimizes risk
Customers only enter their billing information once. Automated payments take it from there. Less input means fewer opportunities for mistakes or fraud.

2. Simplifies the payments process
No one wants to go out of their way to pay for a product. In fact, your checkout process can affect almost 40% of your sales. Not only do businesses need to simplify complex payments processes, they need to minimize the work customers will have to do in the future. A quick and simple signup process now means less work later.

3. Diversifies your offerings to help zero in on targets
Providing various levels of payment plans allows you to appeal to your customers’ specific needs, without forcing them to pay for bells and whistles they’re not interested in. Additionally, offering various payment methods meets your customers where and how they prefer to pay.

4. Provides budgeting outlook and stabilizes revenue
A clean-cut view of monthly or annual expenses helps your customers budget. There are no unexpected charges or service costs. And while that helps them, it also helps the businesses they pay.

Guaranteed income goes a long way, and not just because subscribers become more valuable the longer they use the service. Subscription billing offers businesses a stable outlook on revenue. The ability to forecast allows businesses to scale. Plus, the foresight that comes with subscription billing can mean better planning, less product waste, and higher ROI.

5. Enables businesses to scale and develop offerings
With the guaranteed revenue a subscription model brings, businesses are able to provide a more regular stream of improvements to their products and services.

For example, services like Netflix continually release new content, while companies like Apple that get consumers to sign up for a subscription (such as iCloud storage or the iPhone Upgrade Program) offer consumers a better product every year.

Kugamon makes implementation easy
Businesses need not shy from the process of upgrading to subscription billing technology. Kugamon RevOps lets businesses meet customers where they are. Create as many payment plans as you need, so that customers can find a plan that best suits them.

With subscription billing and recurring payments, businesses show customers they’re in it for the long run. Get a demo of the Kugamon RevOps platform and see how easy it is to get started with offering your customers convenient and tailored ways to pay.