The popularity of subscription licenses has changed the rules for software vendors, who must now struggle to take advantage of recurring revenue while retaining each new customer for as long as possible.
Improve Recurring Revenue
Why is retaining subscribers so difficult? The answer is related to how well merchants anticipate their subscribers’ needs. Here’s a pretty well known secret: The better the customer experience people have while using a product, receiving support, and buying and renewing their subscriptions, the better a vendor’s churn rate will be. This post examines three ways merchant’s can improve their subscription customer’s experience with their brand.
Product Support and Adding New Features
” … we can stop ‘chasing the upgrade’ and just focus on delivering a constant stream of innovation.” – via Entrepreneur.com
Since subscription billing often accompanies cloud products whose feature set can change day-by-day, it is vital for merchants to manage customer expectations by communicating information about new product features. This situation has its advantages for merchants like no longer having to support legacy products or worry about tracking license keys.
But this situation also complicates the buyer/seller relationship, adding features that one segment of your users like but others don’t. Your decision not to include a certain feature may alienate some segments of your customers. This is especially problematic if the addition or removal of valuable features comes with a price adjustment for which the customer has not been adequately prepared.
The task for merchants is to focus on managing customers’ expectations. When implementing potentially disruptive new features, make sure to provide your customers advanced communication.
However, don’t look at this situation as a complete disadvantage. There are many benefits too. Merchants have the opportunity to consistently create new value for their customers in the form of shorter iteration cycles to include new features. This prevents the user experience from growing stale or out of date before the market is disrupted by newer and more agile players.
Renewing and Adjusting Licenses
One of the primary things merchants have to measure and analyze in a subscription setting is not only how many users are renewing every billing period, but are they upgrading or downgrading licenses? Unfortunately, analyzing upgrades or downgrades is a tricky business, and the first thing to do is define exactly what an upgrade or downgrade is.
Let’s say a customer subscribes to a merchant’s Gold Service for one year. When it comes time to renew the customer switches from the Gold to the Platinum Service which costs more. That is an upgrade.
But what if the subscriber switches to the Copper Service (typically of lower value than the Gold Service) but adds ten more seats to her license. Is that an upgrade or a downgrade? Maybe because the merchant is driving more revenue its an upgrade. But maybe the merchant is more interested in viewing upgrades and downgrades in terms of product levels and not revenue.
It is up to each merchant to decide for themselves if an upgrade refers to a product or to revenue, and then measure that performance accordingly.
Self-Service
Customers and merchants are forever busy and the need for support is often viewed as an interruption from the main task at hand. However, subscriptions by definition are built upon ongoing relationships, and at some point, merchants have to be available to support their customers’ requests.
One of the biggest favors merchants can do for their customers is to not make them completely dependent on email or phone based customer service. For starters, merchants can offer self-service options for renewals. They should give their customers different options for updating their payment methods as well as billing intervals. Merchants don’t want a billing event to arrive, and the customer is unable to pay.
Merchants who implement this kind of self-service for recurring customers aren’t just helping their customers. Self-service helps merchants reduce the need for a lot of manual adjustments. The benefit of ecommerce is that unlike brick and mortar stores, the merchant doesn’t have to be present in order to facilitate a sale. But the more manual adjustments they have to make for their customers the less they are taking advantage of the benefits of ecommerce and also the less time they have to improve their business.
Keystone
Gone are the days when your relationship with your buyers ended after they submitted payment. More and more, customers are empowered to demand service their way. It’s your job to make sure that your subscription business is designed to provide the kind of service your customers need.
