The outbreak of the pandemic has turned the US into a nation of cloistered citizens, driving the demand for subscription-based services. Entertainment services such as Amazon Prime, Hulu, and Netflix received a massive inflow of new subscribers. The spending total for “Over-the-top” (OTT) services hit a staggering $22 billion.
More and more subscription services are burgeoning in many verticals, from razor blades to online classes. The possibilities are truly endless for those businesses ready to jump all into a subscription-based business model.
Consumers Enjoy The Perks From Recurring Billing
There are many reasons why customers love subscription services. One of the most prominent benefits is convenience. Subscriptions are not a new concept. Customers have taken part in signing up for subscriptions for decades.
It all started with magazine subscriptions and newspaper deliveries. Here they experienced being charged at a set time every month to receive their favorite products and services.
Here are more benefits of recurring payments for customers:
- Secure and Managed Payments
The biggest draw to a subscription service is the convenience of being able to enter all payment information just once and allowing the service provider to take over. The provider will take charge of sending notifications, and invoices, processing your card, etc.
Customers can also manage their account by upgrading or downgrading their current subscription plan, canceling certain products or services, and pausing or canceling the actual subscription.
- A Convenient Way To Shop
Subscription billing businesses are able to offer their products and services to their customers, directly from their website. By visiting the website, customers can peruse offerings and easily sign up for what they want. Customers can also extend their periods, such as quarterly or annually. They can also be eligible for deeply discounted offers.
Recurring billing allows merchants to build long-term relationships with their customers by offering special promotions and more curated offers.
With subscription billing, customers can enjoy products that are “highly focused” with equally “high levels of personalization”. That is because this business model generates a large amount of customer data.
It ensures that, based on the choices of products and services, customers are able to receive “personal recommendations” and exclusive offers that align with their preferences.
How Merchants Benefit From Recurring Billing
As the demand for subscription services continues to rise, the market shows no signs of slowing down. Merchants would be wise to adopt this lucrative business model into their own businesses. Here are just some of the reasons that merchants can benefit:
- Predictable cash flow
The most beneficial feature of recurring billing is that it works consistently as scheduled and this ensures you get paid. This allows you to easily determine your income since you know exactly how much money you will have during a certain time frame. The bottom line is that recurring billing optimizes your cash flow and helps you with your financial planning.
- Build customer relationships
Most subscription billing platforms have tracking capabilities built-in so that businesses can receive insights into customer behavior. By doing so, the business will see an increase in consumer engagement, increase customer satisfaction, and boost the retention rate. With customer data, you are able to better segment customers according to their preferences and engage with them accordingly.
- Payments Are Kept Secure
Recurring billing solutions come equipped with safety and security features such as PCI compliance. This keeps you from investing your own time and money to acquire a PCI compliance certificate on your own, which could be very complicated.
There is no doubt that the subscription-based business model is the driving force behind many emerging and established companies. Deloitte’s Digital Media Trends Survey unveiled that 52% of CFOs said that 40% of their revenue is recurring.
This revenue strategy would be a great addition to any forward-thinking company this year and beyond.