Blog / LearnFriday, March 20, 2020
When you’re running any business with a subscription model, making it easy for customers to make repeat payments is crucial to your success. This is particularly true when it comes to running your SaaS business, where customers want to be assured of continuous and uninterrupted service.
Using a recurring payments system means:
The simplest recurring payments definition we can think of is that they allow your customers to repeatedly make payments, without having to take any action.
You seek permission from your customers to take repeat payments from them so that they can use your product or service on an uninterrupted basis. How you offer your subscription will depend on your business model.
Typically, SaaS businesses offer a monthly or an annual payment option, with a discount for paying on an annual basis.
Businesses are happy to offer a discount on annual subscriptions as they have that revenue locked in and guaranteed. Many SaaS companies will also have conducted research or have data analysis tools that tell them what the optimum discount to offer is, while targeting annual sign-ups is a great way to grow revenue if your data shows you that your typical subscriber unsubscribes within 12 months.
Your business not only gets revenue but then has a longer window to address customer issues and make improvements to your service based on feedback. A customer on a monthly subscription plan may be more likely to unsubscribe on a whim, you lose them and the revenue, and it may be difficult to get them back.
In terms of offering subscriptions, you have the option of:
Having a subscription or recurring payments model for your business is a great way to grow your sales, profit, and your business overall. You’re effectively putting an element of your business on autopilot!
You’ll enjoy a vast range of benefits when your business is set up to accept recurring payments, including:
You can have the best SaaS platform around, but if you have a sub-standard platform handling your payments it will be hard to grow your business.
While you will have your own specific requirements for what you need based on your business model and target market, as a minimum you should be looking for your payment handler:
Recurring payments is a type of automation, which means you can minimise the human time you need to spend on tracking customer payments. Your expenses and the resources you need to use in terms of collecting revenue will reduce dramatically, and you can save cash on paying for outsourced accounting functions or redeploy any in-house roles to be more beneficial to your business.
While a great payment platform will provide you with all the data and insights you need in relation to customer churn, it’s critical that you continue to manage it!
It’s easy to see healthy revenues coming in, especially if you are seeing slow and steady growth. However, the devil will be in the detail of that slow and steady growth. Are you attracting a lot of new customers, but losing a lot of customers at the same time? If so, this might suggest a disconnect between your sales team and the reality of your platform or the standard of your customer service.
Remember to keep on top of your customer churn, slow and steady growth and consistent revenues might be nice but doing a little digging could help you realise you’re on the cusp of a huge revenue increase.
Learn more about customer churn analysis and management with this Upodi guide.
In the same manner that you should continue to focus on managing churn, you should also ensure you’re actively managing non-active users.
It’s easy to rely on customers who “set it and forget it”. The customer database of businesses that offer subscriptions are filled with people who pay each month but rarely, if ever, use the service or product they are paying for.
From a revenue perspective, this might seem like a bonus, but your engagement for these customers will be zero and you’re not really making a difference to these people. You could argue they’re not even really customers!
Use your data to send emails out to customers who don’t sign in over a specified period. Yes, this will prompt some people to unsubscribe and give you a short-term drop in revenue, but in the longer term it will mean your business grows an engaged subscriber base.
Getting started with recurring payments in your business is easy.
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