As a business owner, it’s always a question of what the most cost-effective way to achieve your goals is. Spend too much, and you’ll cut into your profit margins and make it hard to grow. Spend too little, and you won’t have the necessary infrastructure to meet your customers’ needs.
This calculation is especially hard to make when you’re launching something new, like a subscription offering. You’ll need to build a strategy and tech stack to support your expanded ambitions. But the stakes are high. If your new offering doesn’t take off the way you planned, you could end up without the resources to pivot toward a more profitable path.
Don’t let yourself end up in this position. Setting up a recurring revenue stream has benefits for businesses across multiple industries. However, you need to do it right — which means choosing a subscription business model that matches your customers’ needs and finding subscription management software that supports it. Here’s what you should think about when you’re choosing tools to support your subscription ecommerce initiatives.
Subscription management software handles everything required to set up recurring sales. It gives you the tools to establish a recurring billing system, automate those transactions and support your team’s fulfillment efforts.
Expanded customer communications are built into most subscription management software as they’re crucial for subscription merchants. For example, you’ll need to notify your customers when their subscription is about to renew, when each payment goes through and when their package ships. A subscription-focused CRM integrates with popular text messaging and email services (like Twilio and Mailchimp) so you can automate these notifications. Leading subscription management software also comes with a subscriber portal that allows buyers to update their payment and shipping information and customize their shipments.
Finally, subscription management software helps you gather important subscription metrics so you can track the performance of your program. From new signups to churn rate, these data points are essential for merchants who want to create high-performing subscription programs.
Streaming services like Netflix aren’t the only type of company that can thrive with a subscription-based model. There are three main business types that stand to profit from the addition of subscription products.
Online marketplaces, whether for physical or digital goods, can introduce subscription products to give shoppers a unique experience. Merchants who sell items that consumers need to replenish on a regular schedule, like food and beverages or household goods, can set up regular shipments to loyal buyers. Those who focus on lifestyle and luxury items, like clothing and accessories or cosmetics, may thrive with a curation model that delivers handpicked goods to subscribers. Purveyors of digital goods and content like courses or digital downloads can offer subscribers ongoing access to their library.
If you provide a service people regularly need or constantly use, setting up a subscription model is an easy way to keep customers satisfied. The most common form is software-as-a-service (SaaS) for corporate customers, but individuals also use SaaS for data storage and basic tasks like word processing.
Consumers may also be willing to pay a subscription for services performed by individuals as long as they need those services regularly. For example, a maid service or landscaping company could let customers subscribe to regular home maintenance visits. Professional service providers who work on retainer (like lawyers or financial advisors) might opt for a subscription rather than manually billing clients each month.
Consumers will enroll in memberships to get better deals — so why not sell your most loyal customers on an exclusive experience? Shoppers already love club-type programs, like Costco or Sam’s Club, that give them exclusive access to a store. Businesses that sell access to a specialized space (such as a coworking office or a gym) can also convert visitors into subscribers, thus increasing the convenience for both parties.
Memberships don’t have to be an all-or-nothing approach. Some of the most popular subscriptions of this type offer perks — think Amazon Prime’s free two-day shipping. Others give subscribers access to branded communities where they can connect with like-minded people, share feedback with brand representatives or get immediate customer support.
The best subscription management software comes with the features you’ll need to get started and then helps you grow as you increase your monthly and annual recurring revenue. SMBs may want an option with a solid set of base features and the ability to upgrade to advanced capabilities with add-on purchases.
Consumers expect subscription providers to cater to their needs, so let them set the schedule by offering multiple billing options. Basic subscription tools typically offer cyclical billing (on 30, 60 or 90-day intervals), but this is far from the only billing model. Look for a tool that allows you to bill monthly on a set day or date. Specialized sellers may want to create a preset billing schedule that applies to every subscriber.
Billing frequency is a big factor in the success of many subscriptions — bill too often, and your customers will get too much product; not often enough, and they’ll run out between shipments. To give your buyers the most control, find a subscription management tool that allows them to pause or skip shipments and choose their own frequency.
Payment orchestration platforms (POPs) coordinate your various payment tools and allow you to integrate multiple payment gateways into one streamlined checkout so you can accept more payment methods.
Many POPs come with additional or add-on features to boost your payment process further. Payment routing tools analyze success rates and fees to send each transaction through the gateway most likely to approve it at the lowest cost to you. Account Updater integrates with your database to spot expired credit cards and coordinate with card issuers to update them before you attempt a transaction. And a good BIN blocker will protect you against BIN fraud.
Failed recurring payments are one of the big challenges of subscription management, which means you need a robust toolset to address this issue. The first way to automate transaction retries is to set up payment cascading. When a transaction fails, it’s passed along to a different payment gateway and tried again. You can configure your system so payments “cascade” through multiple gateways until they succeed.
Transactions that still fail may need to be retried at a later date. There are two options to automate this process: first is a traditional Decline Manager, which retries payments based on preset rules. The second is Smart Dunning, which uses machine learning to identify the best time to retry a transaction based on multiple factors. Smart Dunning helps merchants save between 25 and 50% more transactions than traditional decline management methods.
Subscription businesses face a higher risk of fraud and chargebacks, but our subscription management platform integrates with Kount anti-fraud to detect and block scammers. Make sure that whatever tool you use has its own comparable fraud-fighting tools.
The occasional chargeback may seem like a cost you can bear, but when your chargeback ratio gets too high, you’ll find yourself paying higher fees for financial services. Find a subscription management tool like sticky.io that offers chargeback alerts; this service allows you to instantly refund a customer before their dispute affects your chargeback ratio. For those chargebacks you think are unfair, our representments service brings in a team of professionals to fight cases on your behalf.
Companies that hold sensitive customer data are responsible for keeping it safe. Make the job easier by investing in a platform that conforms to industry standards. sticky.io is fully PCI DSS compliant and follows the PSD2 rules required for any merchants who operate in the EU or EEA. Our platform also keeps you aligned with GDPR and other local data privacy laws — a must for any seller.
Some merchants also need to follow industry-specific regulations. Our platform is HIPAA compliant; if you need to comply with other professional standards, make sure you look for a tool that can help you along the way.
The subscription industry has come a long way since Amazon released its subscribe-and-save feature. Consumers have access to more subscription products, greater customizability and more control. As innovative ecommerce merchants continue to find new ways to bring in subscribers, you’ll need to keep up if you want your subscribers to stay loyal.
Investing in full-featured and flexible subscription management software will help you keep your subscription offerings current. While it’s tempting to choose the budget option, you’ll be cheating yourself out of current and future revenue. Build yourself a robust and scalable subscription tech stack now to save yourself the hassle of having to migrate to a new provider when it comes time to offer more features. The better your subscription foundation, the easier you’ll find it to grow.
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