The attraction of recurring revenue is making the subscription business model increasingly appealing. Many established businesses are transitioning from selling products to becoming service providers, while entrepreneurs often start out with a service-based approach from day one.
Unfortunately, for many companies, it is not easy to turn the theory intoa sustainable business model. Most beginwith asimple conceptwhich is easy for customers to adopt, but in the global, digital economy is also easily replicated. So when a competitor enters the market and undercuts them on price, differentiation becomes harder to achieve.
Businessesaiming to join the subscription revolution are typically looking to add more options for segmenting their customers; more flexibility around how they price and package their services and upsell and cross-sell new offerings. And they want to do this while keeping overheads to a minimum. So how can they achieve this?
Here, Louis Hall, CEO, Cerillion Technologies, provides four top tips as to howyou can monetise your service options.
– Make sure you’re offering the right payment choices
From the outset you need to think aboutwhat payment options to give your customers. You mustdecide whether you want to enable people to pay by credit card, direct debit, PayPal and other methods such as bank transfer, for example. And you need to put in place the right systems to enable this. The kinds of solutions you implement will obviously depend on your business model and types of customers. However, the top priority should always be to make the process as simple as possible.
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– Ensure you package your solutions properly
While most consumers are happy to pay a standard price for a standard product, businesses will typically want to negotiate a better price and may also look for the product with which they are being provided to be differentiated in some way. So again knowing your customer well and having a flexible way of packaging and pricing your products and services is important to be able to address their needs – whether they are a business or a consumer.
– Focus your business model on recurring revenue
By going down the subscription path, you are creating a relationship where you are focused on making it easier for customers to buy again from you, and equally important they will be less likely to buy from someone else. By having a subscription and a regular contact point, customers that require additional products and services can just add those to theiraccount rather than having to go through a separate payment process. In monetisation terms, creating a stronger relationship with customers through subscriptions, makes it easier to win repeat business and upsell more.
– Make sure you put flexible billing in place
A business model based on subscriptions and usage needs flexible pricing options – but traditional on-premise billing systems are typically too expensive or not agile enough to handle this requirement. It often takes years to implement, configure and integrate a traditional enterprise billing system with other on-premise applications, and a lot of capital will be spent before any benefits are achieved. Cloud billing can be key here, reducing the time taken and cost of setting up new services and enabling businesses to rapidly turn innovative ideas into monetised solutions.
Many businesses are looking to join the subscription revolution. Success, however, will depend on the ability to rapidly monetise service offerings. To achieve this, businesses will need to make it as easy as possible for their customers to engage with and spend money with them. I believe that by following the advice outlined above they can go a long way towards making this happen.
