Recurring Payments
Recurring payments: Which business models can benefit from subscription billing
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25 October 2017
Victoria Galloway
Advantages of recurring billing for your business and customers.
Back in April, Hyundai announced a subscription payment plan for its new Ioniq fully electric hatchback for its customers in California. Customers can pay $275 a month for 36 months which includes the purchase of the car and all associated costs. They say it’s a transparent, stress-free way to purchase the car and hopes the simplicity will convert uncertain buyers.
So, with subscription services and recurring billing models now spreading from mass consumption streaming industries into high ticket items like vehicles, we wanted to look at the advantages and challenges of recurring billing systems, and how you can implement them without damaging relationships with your customers/clients.
WHY SUBSCRIPTION/RECURRING BILLING IS SO POPULAR
Jason Andrew, the CoFounder of Smart Books Online published an article recently that explains consumers are moving from ownership focussed transactions, to outcome-focused ones. In other words, consumers no longer want the burden of ownership, they desire the immediacy and flexibility of the outcomes.
Subscription services aren’t a new thing either. Pymnts.com remind us “there’s a reason the tallest building in every city is an insurance building”. While not identical to the subscription services we think of today, the insurance and utilities industries have used recurring billing for years with incredible success.
ADVANTAGES OF RECURRING BILLING
One simple reason recurring billing is so popular is that it’s a mutually beneficial option for the consumer and the business. The consumer only needs to set-up their payment details once and can enjoy the service without lock-in contracts or actively needing to make the effort of payment again. Businesses, on the other hand, get a steady cash flow, more reliable forecasted revenue, and potential savings on staff and administrative resources.
There are plenty of other reasons to consider recurring subscriptions though:
ADVANTAGES FOR BUSINESSES
ADVANTAGES FOR CUSTOMERS
ADVANTAGES FOR THE ENVIRONMENT
Depending on your commitment to sustainability and/or CSR endeavours, recurring billing can reduce negative environmental impact by removing things like excess paper and fuel usage from invoice printing and delivery.
INDUSTRIES BENEFITTING MOST FROM RECURRING BILLING
While industries like streaming, insurance, telecommunications and utilities have implemented recurring billing systems with great success for years, not every industry will be suitable. Having said that, subscription services are branching out to other industries with physical products that support regular purchasing patterns.
Retail
The retail industry is a clear target for subscription-based offerings. The fashion industry, in particular, has begun to dip its toes into subscription systems with the onset of regular box deliveries. Ranging from business socks to entire outfits, businesses are hoping to create lifetime customers by removing the hassle of deciding what to wear.
Pet retail has also bloomed as businesses exploit the deep-seated urge to lavish your cat, dog, hamster, rabbit or goldfish with the latest and greatest in toys and treats. BarkBox, for example, deliver toys and food for your favourite four-legged friend every month.
Fitness
Thanks to the incredible volume of fitness models and “influencers” on social media, the fitness industry and its shoulder industries, namely vitamins and supplements, have broadened their recurring billing options from just gym memberships.
Monthly supplies of vitamins for good health, protein powders for muscle building, and video/written content offering new workouts or health-conscious meal preparations are just the tip of the enormous growth the fitness industry is experiencing thanks to a subscription model.
Food
From specialist sauces, chocolate extravaganzas, and ingredients complete with menus for your weekly meals, food subscription services like Marley Spoon, and YouFoodz have risen sharply in recent times, making it simple and hassle-free to feed your various culinary addictions or simply organise your dinners for the week.
CHALLENGES OF RECURRING BILLING
The challenges of recurring billing revolve around the platform you’re using and the visibility and control you have over the (hopefully) high volume of users you’ll have using your service.
Some of these challenges include:
THE BOTTOM LINE
Provided you have a platform that can manage user interactions and a payment gateway that offers multiple forms of payment and an easy system for invoicing, recurring billing is an exceptional way to reduce overheads and increase profits.
This system must be connected with a user interface that offers exceptional simplicity and accessibility to customers. If their experience is quick and painless, you’ll increase your chances of organic promotion and increased subscribers.
With a simple to set up and use interface and complete management and overview of your clients, Bambora offers the ideal payment gateway for your subscription services. Get in touch with us today to see how a partnership with Bambora can deliver an excellent customer experience and a secure, reliable payment gateway for your recurring billing service.
Recurring payments: Which business models can benefit from subscription billing
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