Routine is big business - and everybody's doing it.
Former US president Barack Obama famously enjoyed a wardrobe of identical suits, buying the same one over and over. His reason being that this buying routine minimised the need to make decisions, making life more manageable. Obama had his suits, and those of us in less presidential positions optimise our lives with other routines; membership subscriptions, multiple entertainment platforms on demand, auto-delivered products and easy utility and household bill settlement.
With our lives going on autopilot, the subscription payment model is perfectly suited to capturing our routine revenue. And today's consumer has a changed perception and preference about repeat payments, making the move towards a subscription billing model look favourable for businesses.
The rise of the recurring payments model
A study conducted by Ovum Research for Zuora, a leading subsription provider, indicates that 70% of Australian and New Zealand businesses are planning to make the shift to a subscription model in the next two to three years. The same study shows Australians and New Zealandders currently spent an average of $600 per month on subscriptions and recurring goods. John Kearney, Managing Director, Asia Pacific, at Zuora, comments:
"Consumers wanting greater control and businesses seeking recurring revenue and a direct relationship with their customer are together creating fertile grounds for this movement towards subscription-based models."
You've only got to look as far as subscription video-on-demand (SVOD) to see where there's routine there's revenue. The Australian SVOD market has increased 31% in the last 12 months. Consumers are finding their favourite platforms and sticking with the monthly billing cycle.
The appetite for subscription-based entertainment can be attributed to a few things: no ads, shows can be conveniently accessed over multiple digital channels, the platforms (like Netflix, Stan, Foxtel, for example) are personalised and the payment is set-and-forget.
Which industries are benefiting from routine billing?
Look no further than even a decade ago and recurring payments were mostly limited to newspapers, physical film rentals and season tickets to your favourite games. The recurring model was almost exclusive to larger merchants whereas today the model is driving growth for merchants of all shapes and sizes.
Many different types of products are being sold by subscription. Some products are simply replenishment, like soap, pet food, shaving creams and anything else we all buy at regular times. These industries rely on the convenience of customers not having to remember to buy items. These industries rely on the convenience of customers not having having to remember to buy items. Other types of subscriptions are inspirational like fashion and food boxes. For any business, getting customers to start subscribing can be quite high risk and it has to involve an easy and efficient experience. Features like free returns no commitment to buy and also personalisation is key if the subscription business will succeed.
Industries benefiting from the subscription model aren't creating new products but packaging them in a different way. These industries include:
- Food and beverage
- Make-up and luxury goods
- Gym and sport memberships
- Streaming services
- Utilities and household bills
Recurring payment arrangements help to engage customers who have a 'sticky' value - where they're looking for a long-term commitment.
The sought after routine loyalty payment
With subscription services comes loyalty payments. But getting this is all about one thing: customer experience.
A prime example of customer experience coupled with a killer subscription deal is Amazon. The Amazon Prime product launched in 2017 and while it can be argued Amazon have made more of a silent splash rather than a big wave in Australia so far, the Prime product is competitive at $54 per year for streaming and delivery services.
The Amazon Prime experience, from website engagement all the way through to the recurring payment set-up is clear, customer-focused, user-friendly and ultimately long-lasting.
The journey to recurring billing is more lasting than the customer journey to a one-off purchase and is anchored by good user experience. With subscription services, the payment is taken to a deeper level where the customer is prepared to make a purchase that could repeat itself for months - potentially years.
5 benefits of subscription billing for capturing routine revenue
When it comes to routine revenue, there are many advantages of recurring billing for both business and consumer - but here's a top five.
- For shoppers, the convenience of set-and-forget billing and the simplicity of automatic payments is almost second to none. There's no need to remember/input card details or when to pay bills.
- When you opt for subscription billing services from a payment processor like Bambora, you're enabling customers to pay using their preferred payment method - Visa, Mastercard or with their bank credentials. Automation saves businesses valuable time and money.
- Offering payee flexibility can vastly improve the customer experience. While this is more complex than managing one-off sales, with the right payment management tools and systems in place you can make light work of scheduled payments.
- Recurring billing keeps card payment information completely secure. Customer card and account information is stored in a PCI environment via token.
- Automatic payment processing helps businesses save time and money. Automated payments replace all of those sheets of paper and manual bookkeeping tasks. Automated payments enable you to send out regular bills, receive payment and record payments easily - freeing up the time to engage with more customers, more frequently.
Features of a great subscription model
Importantly, customers need to feel like they're getting value from a recurring service over time. If they don't then there's a good possibility that they will churn.
If a customer is happy with the recurring service, then they are much more likely to renew and resubscribe. This might sound black and white, but managing churn can be quite complex, especially for businesses just starting their recurring journey.
While tactics like lengthening your subscription cycle can certainly help tp reduce churn, looking for a subscription service that offers all the features and functionality that will enable you to provide customers with a superior service is advised.
Features of a great subscription model:
- Easy integration, like via API
- Offering your customers multiple ways to pay
- Easy payment acceptance with multiple currencies
- Easy payment scheduler that enables flexible payments
- Opting for a PCI compliant payment processor
- 24/7 support
- Reporting and insights
Offering recurring payment options to your customers shows that you're adapting to meet their expectation, which are ever evolving. The service helps to strengthen your brand's relationship with your customers as you tune into how they're running their lives.
If you're keen to find out more about Bambora's subscription and billing services, don't hesitate to get in touch.