Win over your customers with customized subscription packages
More and more players are offering their services on a subscription basis. A powerful sales argument, but how do you manage it in the back office? Find out all our tips on using payment management.
A commercial advantage
More attractive offers
Subscription formulas are more attractive. They provide a good hook. Their front-end price is often compressed to the maximum to capture attention. Once the prospect has subscribed, there's "nothing left to do". By displaying an attractive introductory price, you minimize the customer's initial friction. This phenomenon can be observed in many sectors: advertised prices are increasingly translated into monthly payments. This is no insignificant move on the part of brands. Since we generally budget our expenses on a monthly basis, we have a better idea of the budget to be allocated. At the same time, the advertised amount seems much more affordable: the license 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 communication for €10, but €1 per minute if you exceed it. 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 variation on the same model. This is when we are offered :
- a basic version with limited functionality,
- paid options to go further.
Many online service providers are adapting their offerings in this way. For example, Google apps for work offers a basic version for €4/month per user, and a more comprehensive version for €8.
Modular formulas
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,
- number of users: with a maximum number of users, and a cost per additional user,
- actual consumption: with detailed monitoring of customer consumption.
Introducing these kinds of variables into 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 mailbox. Regardless of its 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 fee,
- the other provides a predefined product or service.
What's 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 subscription, they are wrong. In reality, they offer automatic recurring payment: the payment is real, but there are no associated services, as ProAbono's online payment management solution does.
Impact on your business model
On the corporate 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 elements of the current financial year to the following financial year. Specific accounting rules are therefore required.
- from a profitability point of view: at the outset, the first monthly instalments obviously don't cover the cost of producing your offer. But it's over time that you' ll break even. So you're taking a risk, but a long-term gamble.
- from a financial point of view: your customers' payments are spread out, but your suppliers don't wait. You could end up spending more than you collect: your WCR (Working Capital Requirement) is negative in this case. 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. It's your duty to keep your customers informed of the progress of their subscription with you, whether they join or renew. Service continuity must be guaranteed: with updates if necessary, and solutions in the event of service interruptions or technical problems. Interventions and follow-up must be planned and budgeted for in advance.
A specific solution for a specific mechanism
Specific mechanics require specific tools. Traditional payment systems don't allow you to set up subscriptions. But some software solutions do. Such is the case with ProAbono, a specialist in subscription-based payment management. It automates specific workflows to facilitate both collection and customer follow-up. Partnering with a large number of e-commerce platforms, the solution simply connects to your sales interface, requiring no specific development. Its offer, adapted to different sizes of structure, remains accessible to SMEs.
Subscription is a specific sales mechanism. While it offers real commercial opportunities, and often represents a real asset with your customers, it nevertheless requires appropriate management. A specialized invoicing system such as ProAbono provides you with simple and pertinent implementation solutions.
Article translated from French