There are many reasons for both clients and companies to prefer subscription or pay-per-use pricing. Clients love the full service, the monthly fees instead of the capital investment, the ease of use, and the guarantee of service (set it and forget it). And you might like more predictable recurring revenue, less churn, the upsell potential, and the higher customer lifetime value. So how do you get started? In this blog, we help you on your way with a 3-step approach.
Transform From Traditional To Subscription Billing: Start Small
Moving to pay-per-use pricing can feel daunting if you come from a traditional business environment.
Therefore: start small. Most companies start with a simple product line, or in the case of manufacturing take a phased approach to increase the service aspects of their proposition.
Start small and build from there. As you will see the subscription revenue increase, you can slowly build out the proposition and introduce new products and services on a subscription basis.
Step 1: Define Your Business Model and Pricing
What do you plan to offer in your proposition, and how? Here, three elements come into play. First, what business goals do you set yourself with the subscription model? Then, how does this subscription or pay-per-use proposition make life easier for your customer? And lastly, how can I adapt my organization to deliver these services, and at what cost?
From a pricing perspective, align your pricing with the needs of the client, preferably in a metric the client can relate to. If your new pricing model is aligned and solves a client's need, it will make it much easier to win your client over.
Step 2: Collect And Automate Your Billing Data
The new subscription pricing needs to include all possible costs that occur in the delivery of the service to the client. As we know, all prices are not often set solely on costs. But you still need to have transparency to all costs and all billing events recorded.
Hidden costs or unrecorded (and therefore not invoiced) billing events will seriously harm your bottom line. Metering IoT and integration to capture potential external billing events, can make life easier. But equally important is setting up the right billing rules for your propositions. It is easy to adjust from a great setup in an agile billing solution.
Step 3: Make CLV Your Key Metric
Changing to subscription pricing changes your whole operations. By putting the customer first, and not just today’s deal but the lifetime value of the customer, teams need to operate differently. The whole company will need to focus on the long term instead of the initial deal value.
Customer success will be the key driver for growth, not the solver of support tickets, and the back- and the front office need to work together seamlessly with a focus on the client’s needs. It will also require your product team to think beyond today’s solution to fulfill future client needs.
Agile Billing - Adapt Where Needed
As times evolve, your business model will likely be further optimized. This is a journey, not a sprint. Your systems need to be agile, starting with the billing platform. A flexible, rules-based contract structure that can easily adapt your contracts and pricing as you develop your pay-per-use models.
It should also be ready for major data flows as your business will be driven by many different data points, so make sure you have:
- An extensive and solid API integration that allows for indefinite data flows
- A solid, scalable processing capacity that ensures all data gets processed correctly
Investing early in a good billing system will not just take a future headache away, but also give you those key insights into customer behavior that brings you further on your journey.
download a quick guide to RECURRING REVENUE BUSINESS MODELS
Take Us To The Test!
If you feel your billing needs will outgrow your current recurring revenue billing solution, or if you are just curious to learn how Good Sign does things differently, feel free to take us to the test! We will gladly take on your challenge and prove to you it can be done, and that the new world lies beyond just subscriptions.