Revenue Management & Customer Retention in Subscription Business

April 13th, 2012

Principle of Subscription Business Model - “Transforming Onetime Revenue to Recurring Revenue”. This lured many corporate and even industries to shape, offer and buy their services on subscription basis by the customer. Many (companies) turned to subscription model to -(leverage on) the advantages embedded in the principle  such as business continuity (Financially), brand and customer loyalty, up selling, revenues from subscription sale (value) greater than One time, etc. Customers prefer to buy product or service on subscription basis as it eases the payment for expensive items, saves time in case of frequently purchased items, etc. This Model fetches advantage for both the customer and service provider.

How customer retention results in revenue generation?

Service Provider receives payments from customer on periodic basis in subscription model, but one should be aware of the fact that losing a customer in middle of any subscription period might bring down sale value, instead which onetime sale would have bought him more money. So, retaining a customer in subscription model is a key for recurring revenue. Service providers need to efficiently and effectively handle the some / all of the below activities in order to retain a customer in subscription model

Pricing and Packaging Management: Create and offer flexible price plans, offer discounts and promotions, etc to win a new customer and also for retaining the existing customers.

Contract Management – Service providers need to efficiently store and manage the contract related transactions such as up gradation/down gradation/renewals) to maintain a continuous information of a customer. By knowing purchasing behavior of a customer on a continuous basis will facilitate a service provider to retain a customer.

Billing – Number of invoices generated will be more in subscription model compared to onetime sale. Service providers should be able to generate invoices on periodic basis with different frequencies (monthly/quarterly/half yearly/Yearly) as per contract agreement.

Customer Care – Need to provide 24/7 online help desk services, handle requests in time, and provide self-care portal with privileges to view their contract details, bills, raise tickets, etc for providing transparency.

Some service providers handle these operations manually, which might work for a business with a low customer base, but for higher ones there should be a system in place to take care of these operations.  In the case of a small company the billing process is handled manually and faces a critical challenge in scaling up their business. And a reasonably large company faces critical issues by managing their business in a manual fashion or by obsolete systems. Subscription centric billing systems like eVapt are fast replacing various traditional billing systems in many companies across the world. These billing systems come with a set of features that are increasingly becoming necessary rather than a option to run the business. These modern day billing systems come with various abilities like integration with CRMs, ERPs, Financial Accounting Systems, etc and ability address various organization specific billing requirements and supports data transformation / sharing

These benefits are increasingly being adopted by various business houses across the world and are enabling them to scale up their business by completely automating their business process and supporting in faster time to market their services & offerings.

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