Win over your customers by offering tailor-made subscription packages
More and more players are offering their services on a subscription basis. A powerful selling point, but how do you manage it in the back office? Read all our advice on using payment management.
A commercial advantage
More attractive offers
Subscription packages are more attractive. They provide a good hook. Their front-end price is often compressed to the maximum to grab attention. Once the prospect has subscribed, there's "nothing left to do". By displaying an attractive introductory price, you minimise the customer's initial friction. This phenomenon can be observed in many sectors: advertised prices are increasingly translated into monthly instalments. This is no insignificant move on the part of brands. Given that we generally budget our expenditure on a monthly basis, we have a better idea of the budget to be allocated. At the same time, the sum advertised seems much more affordable: the licence no longer costs €1,200, but €60 a month for two years.
Pay what you need
Another growing phenomenon is pay-per-use billing. Like telephone operators who offer an hour's call for €10, but €1 a minute if you go over that. The system can be tiered. For example, when the price per minute drops to 50 centimes after an hour of out-of-pocket calls.
Modular offers are a variant of the same template. This is when we are offered :
- a basic version with limited functionality
- paying options to go further.
Many online service providers are adapting their offerings in this way. Google apps for work, for example, offers a basic version at €4 per month per user, and a more comprehensive version for €8.
Modular packages
The adjustment variables for packaging your offer may depend on :
- functionalities: with a distinction between those that are included and those that have to be paid for,
- the number of users: with a maximum number of users, and a cost per additional user,
- actual consumption: with detailed monitoring of customer consumption.
Including this type of variable in your offer is a real selling point with your customers. But technically, how do you go about it?
How do you set it up?
The subscription system
We've all subscribed to a magazine at some point. We received it at regular intervals in our letterbox. Regardless of the duration or content, a subscription is ultimately a paid service delivered over a given period. A subscription is a contract under which :
- one pays a regular sum
- the other provides a predefined offer (product or service).
What is important is that subscription is not a payment method, nor a recurring payment, but a business model in its own right. When payment service providers - such as Paypal, Stripe, Paybox, Braintree, GoCardless or SlimPay - present their offers as subscriptions, they are wrong. In reality, they offer automatic recurring payments: the payment is real, but there are no associated services, like the online payment management solution ProAbono.
Impact on your business model
On the company side, the introduction of a subscription service impacts the business model on several levels:
- from an accounting point of view: delivering an offer over time means allocating certain items from the current financial year to the following financial year. Specific accounting rules are therefore required.
- from a profitability point of view: at the beginning, the first monthly instalments obviously do not cover the cost of producing your offer. But it is over time that you will break even. So it's a risk you're taking, but a long-term gamble.
- from a financial point of view: your customers' payments are spread over time, but your suppliers don't wait. You could end up spending more than you take in: your WCR (Working Capital Requirement) would then be negative. This is an important " cash flow " aspect to take into account in your business model.
- The relevant indicators for assessing the development of your business will differ depending on whether you sell by subscription or on a one-shot basis. Your business metrics will therefore need to be read differently.
- Finally, your customer service. You owe it to your customers to keep them informed about the progress of their subscription with you, whether they sign up or renew. They must be guaranteed continuity of service: with updates if necessary, and solutions in the event of service interruptions or technical problems. Interventions and monitoring should be planned in advance, so that they can be properly budgeted for.
A specific solution for a specific mechanism
A specific mechanism requires a specific tool. Traditional payment systems do not allow subscriptions to be set up. But some software solutions do. This is the case with ProAbono, a specialist in subscription payment management. It automates specific workflows to facilitate both collection and customer follow-up. As a partner of a large number of e-commerce platforms, the solution simply connects to your sales interface without requiring any specific development. Its offer is adapted to the different sizes of organisation, and remains accessible to SMEs.
Subscription is a specific sales mechanism. While it offers real commercial opportunities, and often represents a real advantage with your customers, it nevertheless requires appropriate management. A specialised invoicing system such as ProAbono provides you with simple and relevant implementation solutions.
Article translated from French