The subscription economy is emerging to transform how businesses operate, particularly for online selling and SaaS companies. It taps on the basis of creating a business that is automated, time-efficient, and lays a foundation for a long-lasting relationship between owners and buyers.
Needless to say, the recurring payment system is at the core of the subscription business.
If you are looking to switch to this dynamic business model, here is your guide. But first, let’s go through the perks of the recurring payment system.
The Benefits of a Recurring Payment System
Before diving into the details, let’s quickly define what is a recurring payment system. The recurring payment is the payment method where users subscribe to use a product or a service for a period of time and pay on a periodical basis. Recurring payments can benefit both your business and your customers in many ways. Here is how:
Reduce late payments
Once the recurring payment is set up, the whole process of transferring money to your merchant account and billing is automated, 24/7. Whether your customers are out on a business trip or on a vacation on the other side of the globe, you wouldn’t have to be afraid of a late or missed payment. With recurring payment, on-time payment is guaranteed.
Predict cash flow
As a merchant, you need to look at your cash balance at regular intervals to make business decisions, whether to allocate your budget, make some investment, or adopt new features on your system. With automatic recurring payments, you can foresee what’s coming and make a better decision on your business plan.
Create a steady revenue stream
Unlike the pay-per-use business model, subscription users have to repeat payments during a period of time. If a customer signs up for your products, they don’t just pay and go, they will stay as long as your products are still tempted to them. So with a recurring payment system, you can expect repeated revenue and a cash flow wired into your account periodically.
Cut the administrative costs
Needless to say, the recurring payment system cut down on the papers, bills, and unnecessary legwork to ask customers to go back and forth at the transaction office to make a payment. The automatic recurring payment is online and secured. It’s a one-for-all solution that saves you a lot of paperwork and effort.
Provide better customer’s experience
- Experience better products and constantly improved services. With the subscription business model, you are pushed to look into your business in the long run, constantly improve your products, and refresh it to keep your customers stay. So customers will always get exposed to new things with the same amount of money paid in each cycle.
- Set and forget. Customers won’t have to be so mindful of what and when to pay or experience the disruption in using services due to the late payment.
- Plan the budget. Automatic recurring billing enables customers to anticipate what are the minuses in their bank account this month thus make it easier to allocate their budget.
- No need for physical presence to make a payment. With the recurring payment system, payment is automated and billing will be sent to customers’ email once the money is deducted. No more errands running to the office to get your bill set up.
Want more on the benefits?
Check it out here: Subscription Payment: Benefits for merchants
If you are wondering how to build an effective recurring payment system to yield good results for your business. Here is what you need to know. Read on to find out!
5 Tips to Build the Best Recurring Payment System
#1 Price your product
Pricing is a stepping stone to a successful business. First, you need to understand the targeted consumers of your products and set a proper pricing scheme. This is key to acquire new users, keep them around, and not letting your competitors get in the way then steal your customers away.
Pricing should vary depending on the premium services users need. Also, be mindful to offer more new functions and look into offering a competitive payment scheme as the market changes along.
The subscription market is a new battle online as many businesses are switching to this model, so be flexible with the packaging you are offering. Keeping the existing customers is of paramount importance in the subscription business so don’t hesitate to tip your loyal consumers or long-using customers a discount or a small gift. It is a nice gesture to show your customers you value their presence.
#2 Build a seamless experience for users across platforms
A website alone wouldn’t do as many people are switching to mobiles or applications for shopping. The market share of mobiles in September 2020 was 50,21%, surpassed that of the desktop (47,17%). That is to say, if you don’t integrate your recurring payment system to mobiles, chances are you will lose a number of customers who don’t own a laptop.
Again, bear in mind that keeping existing customers stay is so essential in the subscription business as it drives revenue better than acquiring new ones. Thus, building seamless and multichannel support is a great way to grow your retention rate, and ultimately grow your business.
#3 Set up a billing system
Billing for a recurring payment system is complex. There are different plans and payment methods. Some might get a discount upon signing up for your service, some get a gift for an additional purchase, some might choose a 3-month or 1-year plan, etc. so without a functional system, your customers will just flee away.
Convenience also plays an important part. Customers’ credit or debit cards can be issued by a local bank so make sure there are no problems registering these cards on your payment system.
In case errors occur, make sure you notify the users that the subscription was canceled and allow them to retry.
#4 Apply free trials to improve the customer journey
To get subscribed, it’s important to add on the trials to let your customers experience the products and understand the foreseeable result before making a purchase. It would make no sense to sign up for something that doesn’t work or not beneficial whatsoever. So focus on the customer journey is key to sell.
Spotify has done a great job by using a free trial tactic! Spotify is basically free. Anyone can sign up and listen to the music that is available for the free version. The more they listen, the more relevant and good music is suggested. It keeps users to stay and subscribe for more resources. What you deliver in this trial stage is a lever to turn users into paid customers.
So put yourself in your customers’ shoes, understand what they need and what you can offer. As simple as that.
#5 Keep track of your subscriptions
To grow stronger, you need to keep an eye on the number of subscriptions and subscription profiles. The data such as billing address, start date, number of payment failure, subscription cycles, etc will help you define how well your business is doing, where to improve, and even when is a good time to advertise your product. In a nutshell, it will help you understand the financial health of your business, and make the right decisions in keeping the business going.
The Subscription and Recurring Payments from Magento 2 is one of the featured tools that helps you to analyze your subscription data and manage your system better!
The subscription business model is now spreading across different industries: cosmetics, learning English, job hunting, movie, you name it. The recurring payment system is placed at its core. Building the right payment system that works well with your business is a challenge. Who doesn’t have a challenge in doing business? Luckily, we have built a functional tool to conquer the challenge you are facing: unlimited subscription templates, trial plans, no manual tasks, manage subscribers’ profiles, and many more!