Unlocking steady growth in revenue with subscription management

In today's dynamic subscription economy, mastering subscription management is unquestionably essential for optimizing revenue and winning customer loyalty. This article delves deep into the complexities of advanced subscription management, emphasizing the critical role of automation in refining processes and driving growth.
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The evolution from archaic barter systems to sophisticated subscription-based billing models marks a profound journey in how we transact and consume. What once began with exchanging goods for goods has metamorphosed into an era where the currency is ‘continuity.’ In other words, today, companies promise ongoing value in the form of software in return for recurring payments — what we call subscription-based billing models.

The rise of the internet revolutionized access to software, transforming it from a luxury that is reserved for a select few, to a necessity that is available to all. Over the past two decades, subscription models have swiftly evolved to address market challenges such as customer churn, cost-cutting demands, and relentless market competition. Businesses have adopted more complex and flexible pricing models, such as usage-based, tiered, hybrid, or volume-based, to stay competitive and relevant to customers.

A survey by CFO Research and Salesforce found that recurring revenue models are firmly entrenched and growing. Over half (52%) of CFOs reported that at least 40% of their organizations' revenues come from usage-based suscription models. 

With the adoption of UBP, businesses have experienced a remarkable surge in growth, accompanied by a wave of heightened customer satisfaction and loyalty. 

  • UBP companies grow 10% faster than traditional subscription models -  OpenView 
  • UBP companies grow 14% faster than traditional companies when their product does well -  OpenView 
  • 80% of UBP customers perceived more alignment with the value they received - Bain & Company research.

Intricate pricing models like UBP are the future of billing. They might evolve to become more flexible and customer-friendly — but there is no looking backward.

Traditional subscription models struggle to keep up with these new-age pricing strategies, bringing modern subscription management to the fore. This article explores modern subscription management and the advantages it can offer to streamline and transform the revenue function to create a unique business differentiator.

What is subscription management?

Subscription management is the process of overseeing the lifecycle of customers' subscriptions, from sign-up to renewal or cancellation. It involves automating tasks such as billing, payments, and updating changes to subscription plans. The goal here is to enhance the customer's buying experience by driving adoption, renewals, retention, and growth, creating consistent revenue streams for the business.

For example, a SaaS company offering project management software uses a subscription management platform to streamline its operations. When a new customer signs up, the platform handles the entire onboarding process, including account setup and initial payment processing.

Throughout the subscription period, it automatically bills customers monthly, adjusts for plan upgrades or downgrades, and securely processes payments. The result is a seamless and efficient customer buying experience, fostering loyalty and sustained revenue for the company.

Besides, the subscription management platform integrates with key pieces in the organization's tech stack (like CRM or marketing automation) to optimize the customer experience across all touchpoints, creating a one-of-a-kind relationship with the business.

Challenges in subscription management

The rapidly evolving pricing models and the pivotal nature of the finance function pose critical and significant challenges to subscription management. 

Increasing complexity of pricing models 

Customer demands and market competition have compelled pricing to shift towards more usage-based models. The less straightforward the models become, the harder it becomes to manage them due to the many attributes to consider and monitor. Without suitable systems, it's impossible to manage such complex subscriptions effectively.

Error-prone manual processes

Manual subscription management can be error-prone and inefficient, increasing the possibility of frequent blunders and customer frustrations. Accurate and timely billing can be challenging, especially with varying billing cycles and pricing models. Also, handling payment failures and declined transactions without disrupting the customer experience requires automated dunning processes and efficient follow-up mechanisms that manual processes fail to offer.

Challenging to stretch for scalability 

As businesses scale, managing an increasing volume of subscriptions, transactions, and customer data becomes more complex. Integrating subscription management systems with other enterprise software (CRM, ERP, accounting systems) becomes increasingly crucial for streamlining the overarching business operations but can be technically challenging.

Regulatory compliance and data security 

Adhering to various regulatory standards (e.g., GDPR, PCI-DSS) is essential to avoid legal issues and protect customer data. Safeguarding sensitive customer information against breaches and cyber threats is a constant challenge.

Data Management and analytics

Additionally, managing and making sense of large volumes of subscription data can be overwhelming without the right tools and expertise. Turning raw data into actionable insights for improving customer retention, optimizing pricing, and enhancing service offerings is a significant challenge, especially if there are no data-tracking mechanisms in place.

Revenue recognition and financial reporting 

Properly recognizing revenue according to accounting standards (e.g., ASC 606) can be complex in subscription-based models. Also, generating accurate and timely financial reports requires integrating data from various sources and ensuring consistency. 

Trying to scale subscription-based businesses without the right tools and processes will be like trying to cross a mighty ocean on a paper boat. In the next section, we will look at what an efficient subscription management process looks like.

How does subscription management work?

The sole purpose of subscription management is to create steady streams of recurring revenue by designing smooth-sailing customer experiences across the buying cycle. It takes perceptive people, efficient processes, and a robust subscription management platform to accomplish that truly.

Let's take a look at how the subscription management process works.

1. Helps create super-flexible pricing models

The go-to-market (GTM) team designs pricing models tailored to customer needs. These models can include different plan tiers, payment frequencies, usage caps, additional features, and other variables. Subscription management software allows you to configure and present these models to customers effectively. It ensures that the entire pricing strategy is accurately represented in the system.

2. Simplifies and streamlines customer onboarding 

Customers can explore the pricing options offered when considering your product. When they decide to sign up, they select their preferred mix of plan, tier, payment frequency, number of users, and desired features and proceed to make the payment. The subscription management platform handles everything from invoicing to billing, ensuring a seamless purchase experience for the customer. At this stage, you can add the touch and feel of your brand to the invoices to instantly show credibility and boost recognition - it encourages customers to make their payments confidently.

Subscription management platforms also integrate with payment gateways like Razorpay and Stripe to make payments safe and more straightforward. With all mountains moved out of their way, customers can make payments and glide away.

3. Automates and monitors ongoing subscription 

Post-purchase, the subscription management platform monitors subsequent payments, renewals, and upgrades. It automates payment reminders and facilitates upselling opportunities for the sales team. This makes the jobs of sales and finance teams more effective and successful because the mundane is taken care of, making more room for strategy and excellence.

4. Helps leverage data and analytics for rapid growth

Subscription management platforms provide robust data analytics to understand customer behavior and its impact on revenue. Businesses can use these insights to take necessary interventions, maximizing both revenue and customer satisfaction. Key metrics such as churn rates, customer lifetime value, and usage patterns help make informed decisions.

5. Enhances revenue visibility

The platform creates visibility around important revenue metrics for all stakeholders, facilitating collaboration and decision-making. With clear and accessible data, teams can work together more effectively to chart and execute foolproof plans.

The subscription management process ensures consistent accuracy. The cycle repeats seamlessly month after month. The insights from each cycle enable continuous improvement, guaranteeing that customer experience and revenue optimization evolve alongside the business.

Five must-practice strategies for effective subscription management 

Best practices empower businesses to optimize their subscription management processes, enhance efficiency, and foresee potential risks while they are still miles away. 

They produce a repetition pattern that sets the finance function up for inevitable growth and success. 

Here are five subscription management best practices:

1. Automate repetitive routines

Manual processes are the enemy of scalability. To grow, automation is necessary. While sticking to familiar manual processes may seem easier, it eventually slows down business operations. Everyday tasks such as invoicing, processing refunds and credits, and managing late fees or penalty charges overwhelm the finance team, reducing their efficiency and productivity. Automated subscription management can streamline these processes with workflows, significantly improving the overall scenario.

2. Embrace flexibility in pricing models

Offer flexible pricing models to cater to diverse customer needs and preferences. Implementing tiered, usage-based, and hybrid pricing plans helps attract a broader customer base and adapt to market demands. Flexibility in subscription plans helps accommodate different business sizes and customer requirements, ensuring your offerings remain competitive and appealing.

3. Optimize for revenue

Optimizing for revenue involves more than just increasing prices. It requires a strategic approach to maximize customer lifetime value (CLV) through upselling, cross-selling, and personalized offers. Using advanced analytics, you can identify opportunities to enhance the value provided to customers, thereby increasing their willingness to pay and boosting overall revenue streams. 

4. Drive decisions using data

Leverage data and analytics for effective subscription management. Analyze customer behavior, usage patterns, and market trends - walk into meeting rooms with data-backed opinions that win over stakeholders. Refine pricing strategies with data-driven insights, identifying at-risk customers, and optimizing marketing efforts to ensure a better return on investment.

5. Ensure regulatory confidence

Compliance with regulatory standards such as GDPR, PCI-DSS, and ASC 606 is critical to avoid legal repercussions and protect customer data. So, implement robust data security measures and maintain transparency in data handling practices to protect customer trust and safeguard your business against potential breaches and fines. 

Subscription management with Zenskar

Zenskar is a modern subscription management solution that empowers businesses to create and manage super-flexible subscriptions with ease

It helps companies automate and manage their end-to-end subscription process on a centralized platform, making processes efficient, reducing churn, and maximizing revenue. 

1. Make it easy for customers to pay 

Zenskar integrates seamlessly with major payment gateways, allowing for smooth and secure transactions. The platform enables you to brand your invoices, creating a consistent and professional look that reinforces your brand identity. You can also add payment links directly to invoices, making it effortless for customers to complete their payments in the comfort of a single click.

2. Improve Cash Inflow

Zenskar automates follow-ups for due payments, significantly improving your cash inflow. Sending timely reminders and follow-up messages ensures that payments are made on time, reducing the chances of missed or late payments. This automation not only streamlines your accounts receivable process but also frees up your team to focus on strategic initiatives rather than chasing payments.

3. Take Control from One Powerful Dashboard

Zenskar offers a comprehensive dashboard that provides a real-time overview of your subscription management activities. From monitoring payment status and collection modes to tracking key performance metrics, the dashboard gives you all the insights you need at a glance. This centralized control allows for quick decision-making and ensures that you are always on top of your subscription operations.

4. Introduce your favorite tools to each other

Zenskar integrates with your existing tech stack, ensuring seamless data synchronization and visibility across all relevant functions. The integrations facilitate better alignment between departments, helping to align decisions with the overarching goals of customer delight and revenue growth. Zenskar creates a cohesive ecosystem that enhances operational efficiency and decision-making.

Experience the power and flexibility of Zenskar. Schedule a demo today to grow your revenue with Zenskar.

FAQs

1. What are the advantages of subscription-based business models?

Subscription-based business models offer numerous advantages, including predictable recurring revenue streams, enhanced customer loyalty through ongoing engagement, and improved cash flow management. These models also provide opportunities for upselling and cross-selling, as well as valuable insights into customer behavior and preferences through subscription data analysis. Additionally, subscription models foster long-term customer relationships, driving sustainable growth and profitability for businesses in various industries.

2. What are the subscription models that can be managed with subscription software?

Subscription management software can handle various subscription models, including tiered pricing, usage-based billing, flat-rate pricing, and hybrid models. With tiered pricing, customers can choose from different subscription tiers based on their needs and budget. Usage-based billing charges customers based on their product or service usage, providing flexibility and cost-effectiveness. Flat-rate pricing offers a fixed subscription fee for unlimited access, while hybrid models combine elements of different pricing structures to accommodate diverse customer preferences.

3. Is subscription management suitable for companies of all sizes?

Yes, subscription management is suitable for companies of all sizes. Whether you're a small startup or a large enterprise, subscription models offer flexibility, scalability, and predictability in revenue generation. Smaller companies can leverage subscription services to establish steady cash flow and build a loyal customer base, while larger organizations can use subscription management to diversify revenue streams and drive growth through recurring sales and customer retention strategies.

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