Subscription models offer companies large and small the opportunity to build predictable revenue and high customer lifetime value. But managing subscriptions effectively and freeing up time and resources for expansion is no picnic.
In a subscription business model, customers pay a recurring fee in exchange for a product or service. This could be a subscription box, a SaaS (Software as a Service) product, or even just a streaming platform like Netflix.
Subscription services are based around needs and desires where consumers will benefit from long-term access, rather than a one-time purchase. While this is positive for cash flow, avoiding ‘subscription fatigue’ is vital if businesses expect to turn a profit.
A robust subscription management platform is essential to reducing admin and ensuring positive customer experiences that keep churn rates low. In this blog, we’re exploring how subscription management software works: The benefits, features, and what to look for in a best-in-class solution.
TL;DR
- Subscription management software automates key parts of the subscription model such as billing, invoicing, and customer relationship management, reducing administrative tasks for your team.
- Key benefits of subscription management platforms include compliance with accounting standards, accurate revenue recognition, and reliable financial reporting.
- Features to look for in subscription software include automated billing, CRM integration, subscription analytics tools, scalability, and 24/7 customer support.
Definition of Subscription Management Software
Subscription management software is a software application or platform that helps businesses manage, automate, and analyze their subscription services. Subscription management platforms will streamline different facets of running a subscription business, including:
- Recurring billing
- Customer relationship management
- Dunning management
- Subscription analytics
- Revenue recognition
- Revenue forecasting
Subscription models offer SaaS businesses a lot of advantages, namely predictable cash flow, building recurring revenue, and more opportunities to build robust customer lifetime value.
However, the intricacies of managing customer subscriptions correctly can be incredibly time-consuming and complex, especially for startups and small businesses that don’t have a team of accountants or customer success managers. This is where a subscription management solution makes building a profitable subscription business infinitely easier.
Benefits of Using Subscription Management Software
While a subscription management platform can be a sizeable investment for smaller businesses, it simplifies numerous areas for your business and frees up precious time and resources:
Streamlining billing and invoicing processes
Streamlined subscription billing is the backbone of any successful subscription-based business. Not only do you need to stay compliant with tax and revenue recognition rules; you also want to bill and send invoices on time to avoid late payments and impacts to your cash flow.
The best subscription management platforms support multiple billing cycles for different products (i.e. monthly, quarterly, annually) as well as handling numerous pricing models like tiered pricing, usage-based billing, legacy plans, and more. A robust billing solution eliminates manual management of payment collection and invoicing, so you can focus on other parts of your business.
Improving customer retention and satisfaction
Today’s consumers want more control over the purchase experience and management of their subscriptions—especially for long-term plans involving add-ons or numerous pricing plans. In fact, 70% of customers now expect websites to include a self-service function.
Subscription management systems that offer self-service portals where subscribers can customize notifications, update payment methods, and activate coupons create positive customer experiences and help lower churn rates across your business.
Enhancing revenue recognition and financial reporting
Revenue management is an overlooked aspect of running a subscription business, but is essential to get right to avoid costly tax compliance issues. Because subscription revenue is earned over the term of a subscription, the revenue earned cannot be recognized and added to Accounts Receivable all in one go.
Subscription billing software that’s compliant with ASC 606 and other relevant Generally Accepted Accounting Principles (GAAP) ensures that reporting accurately reflects your financial position.
Facilitating scalability and growth
As your business grows and adds more subscribers, functionalities such as billing, currency management, and analytics need to scale in tandem to keep your business running efficiently. Subscription management tools with automation help your business to upsell effectively, monitor the subscription lifecycle, and manage recurring payments when your business enters an intense growth phase—without skipping a beat.
Key Features to Look for in Subscription Management Software
Automated billing and payment processing
As we’ve already said in this post, seamless recurring billing and payment processing is a core functionality for any subscription software. This should also include integrations with multiple payment gateways at your checkout (i.e. Stripe, PayPal, Zuora) as well as automated dunning management and credit card retries to avoid involuntary leakage from your funnel. An automated billing system will take pressure off your operation so you can focus on more complex business initiatives.
Customer relationship management (CRM) integration
Having a unified view of every customer’s subscription history, interactions, and preferences makes it much easier for businesses to create targeted marketing initiatives to upsell and improve customer lifetime value. Look for integrations with key CRM software like HubSpot and Salesforce to keep customer data in one place and build SMS and email workflows. By managing the customer journey from the initial sign-up through to key touchpoints like renewals, upgrades, downgrades, or cancellations, you can build a clear roadmap of the customer lifecycle.
Analytics and reporting tools
Understanding profitability and having access to robust revenue forecasting helps SaaS subscription businesses plan for future growth and make data-driven decisions about where to focus marketing spend. A real-time dashboard with metrics you can configure, like monthly recurring revenue (MRR), conversions, and churn rate gives you insight into how your subscription products are performing and why customers might be behaving in certain ways.
Customizable subscription plans and pricing models
SaaS businesses need plenty of flexibility and space to switch gears and adjust subscriptions in response to data. Changes in customer demand, market trends, new technologies, and the state of the economy can all impact how different types of subscription models are going to perform. Being able to trial different types of pricing, such as fixed, tiered, and usage-based, as well as free trials and promotional discounts, allows you to keep innovating and find new offerings that please your customers.
Compliance with regulations and standards
Make sure that your chosen subscription billing platform is compliant with accounting standards such as ASC 606 and IFRS 15 for accurate revenue recognition and reporting. If you’re offering your subscriptions in multiple countries, you also need to consider whether the platform can handle tax calculations and regulations for relevant territories.
How Subscription Management Software Works
Integration with other business systems. Before you start enrolling customers in subscription programs, you need to make sure your subscription management platform is integrated with your key business software. This includes but is not limited to your eCommerce platform, CRM, ERP, and accounting systems so you have access to all the data you need to get a unified overview of your subscription program.
Customer sign-ups. Once a customer has decided to commit to a subscription, they need to select the appropriate subscription plan and add-ons for their needs. If your business is using tiered pricing plans, you can consider adding some incentives to upsell customers onto more expensive plans, such as discounts, free add-ons, or referral rates. Once a customer has selected their plan, they will be prompted to create an account to manage their subscription and billing.
Payment processing. To start their subscription, the customer needs to provide payment details that will be kept on file and charged at regular intervals to maintain access to that subscription.
Activating the subscription and onboarding. Once payment is accepted, the customer should receive a welcome email that provides the details of their subscription, the next billing date, and instructions on how to start using the subscription they’ve purchased. For example, if the customer has access to a self-service portal, this email should contain a link to access it.
Recurring billing management. Your customer may have a choice between several billing models, such as weekly, monthly, or even annual billing in exchange for a discount. Your subscription billing platform will schedule billing and the sending of invoices according to the schedule selected by the customer. If a customer’s credit card has expired, your billing solution may manage one or two automated retries before sending an email reminding the customer to update their payment details.
Handling upgrades, downgrades, and cancellations. Subscription platforms make the process of managing subscriptions as seamless as possible for customers. For example, you can allow customers to upgrade, downgrade, and cancel subscription plans via a self-service portal, rather than having to contact a customer support representative to manage this on their behalf. Once an upgrade or a downgrade is requested, is actioned immediately and adjusts what features/functionalities the customer has access to. Upon cancellation, the customer either has access for the remainder of the billing period or receives a refund for the billing period they aren’t using.
Challenges and Considerations When Choosing Subscription Management Software
Difficulties with integration
Properly integrating your subscription management software with existing systems can be complex and time-consuming, requiring more expertise with APIs than your business may have in-house. Being unable to integrate platforms – or poor integrations that are prone to outages – can lead to data silos, inconsistencies in data, and increased manual workflows.
Security and compliance
Subscription management software needs to comply with a range of tax, legal, and data security standards to avoid litigation or damage to your brand’s reputation. For example, standards such as GDPR and PCI-DSS are key standards to look for in subscription billing software. However, comparing these different standards and understanding how they are integrated into subscription platforms can be confusing and time-consuming for businesses.
Reliability
Frequent system outages or errors when trying to process payments or manage subscriptions add a huge amount of friction to the user experience, while your customer support team loses valuable bandwidth to endless troubleshooting. Moreover, inadequate customer support from your provider can lead to prolonged issues that affect business operations.
Factors to Consider During the Selection Process
Budget
Different platforms will use different pricing structures and may not include the same features, so it’s important to analyze your chosen platform carefully to understand what it covers. Costs to factor into your budget are:
- Set-up costs
- Ongoing fees
- Transaction fees
- Chargeback fees
- Add-on fees
Scalability
If a subscription management platform cannot scale as your subscriber count grows or handle higher transaction volumes, this can cause your business to stagnate and struggle to provide a positive customer experience. Issues with scalability can result in difficulties onboarding new customers, longer processing times to update/cancel subscriptions, and delays in processing payments.
Check that your chosen platform is able to scale in line with your projected growth, to avoid having to switch systems in the near future.
Customer support
A provider who offers 24/7 customer support via email, live chat, and phone ensures that your SaaS business can always get assistance for urgent issues. A comprehensive help center with support documentation will also help your business to troubleshoot issues independently.
Features
There are certain core features that your chosen subscription management software should have to cover all the bases, including:
- Automated recurring billing
- Payment processing
- Revenue recognition
- Subscription analytics
- Dunning management
Value-adds to consider depending on your business’s needs include customer relationship management, custom dashboards, and predictive analytics.
Ease of use
Your subscription management platform should be intuitive not only for your operations team to use, but for customers, too. Subscribers should find it easy to manage their subscriptions and upgrade/downgrade/cancel as needed, which helps to reduce support tickets so your team has more time to handle more complex requests.
Future Trends in Subscription Management Software
What’s next in the subscription management realm?
Advances in AI and machine learning are making it easier for subscription management platforms to predict customer behavior. Predictive analytics make it possible to identify which customers are at the highest risk of churn, or which upsell promotions are most likely to convert different consumer segments. This makes it possible to craft highly targeted messaging, recommendations and offers that maximize revenue and improve customer satisfaction.
Automation technologies in subscription management are providing more ways for businesses to automate routine, manual tasks that take up a lot of support time, such as payment processing, upgrades, live chat, and more.
Subscription management software helps businesses to effectively handle the complexities of recurring revenue and the ongoing customer experience. From automating billing to providing more robust data insights and ensuring compliance with accounting and revenue recognition standards, these platforms streamline operations and free your team from endless repetitive admin.
However, selecting the right subscription management solution is crucial to reduce these administrative burdens and provide a seamless customer experience. As the subscription economy grows, investing in the right platform will position your business for long-term success.
Final Words
Choosing a subscription management solution is a big decision—one that shouldn’t be made overnight. You need to research different software options, check testimonials, and consult with experts in subscription management – all while keeping your business running smoothly.
As leaders in the subscription management space, Stax can help you streamline the decision-making process and stay ahead of the curve. Check out our blog and subscribe to our newsletter for fresh insights on the subscription space!
Request a Quote
