It seems as if nowadays subscription business models are everywhere, they have evolved from paid subscriptions of products such as magazines or services such as milk delivery. Now in our present technology-driven society, we are seeing more and more businesses adopting this model, more specifically in industries such as entertainment and subscription box services.
Before the digital transformation that we are currently experiencing, the biggest challenge that businesses were experiencing was the lack of resources to support collecting recurring payments from large quantities of customers. With ERP systems such as NetSuite, it is now possible to set up and process recurring payments without the significant investment of a labour force to collect payments. Another reason for the adoption of subscription models is the ability to have analytic insights to fine-tune models over time. Modern developments in infrastructure make subscription models easily attainable, but feasibility is only one of the reasons why there is such appeal to this business model.
Our client who operates in the industrial recycling business is based in Canada and services all through North America as well as globally. This business provides recycling solutions for almost every type of industrial project and also gives its customers access to direct markets in order to maximize the value of their scraps and waste materials. Our client’s services include evaluation of material and pick up. Their warehouse allows the processing of recycled goods at the highest standards.
With worldwide operations and specializing in industrial recycling, our client has taken on challenges through innovative recovery techniques which commit to their goal of excellence in customer service. Some of these challenges appeared when more services and various types of recycled products came in demand. The need for a system that could be further customized to cater to new processes appeared.
Subscription business models go way back. They were first introduced by newspaper and books publishers. Now with everything going digital, the rise of software as a service (SaaS) products is growing exponentially. This has forced many businesses to explore new business models, shifting from a revenue model that is made of a customer’s one-time product purchase to a subscription services model, where the revenue now is being made on a continuous recurring basis.
A pricing model such as subscription services works by being renewed and activated automatically with a pre-authorized credit card or checking account. The immediate benefit for businesses is the safety of recurring revenue, which will also allow for a stronger foundation to create lasting customer relationships.
Most subscription businesses charge on a monthly or yearly basis. As previously mentioned, one of the earliest adopters of this model are magazine subscriptions, but now as technology rises many other industries are making the switch to subscription models.
There are plenty of reasons why businesses implement a subscription business model. Of course one of the main reasons is the digital transformation and need to innovate, but other reasons include customer retention, growth potential, predictability, and cash flow.
A subscription company enjoys the benefits of having recurring revenue that will generate a consistent cash flow. Predictable revenue is also a benefit but in addition, it becomes helpful when it comes to ordering inventory based on recurring demand. The more consistent demand and less fluctuation in product orders will make forecasting inventory management and schedule orders a much easier more predictable process.
Growth potential also is another added benefit. The subscription plans allow for regular contact with subscribers opening the doors to more opportunities to up-sell or cross-sell products and premium services with subscriptions.
With a monthly or yearly subscription, there is a higher chance for customers to develop loyalty to the brand and products especially if new products or services begin to be introduced. Customer retention will create a stronger long-term relationship where they are more likely to try the different alternatives of the product or services instead of a one-time purchase.
When investors start getting involved and noticing a business, it is more likely for them to take an interest because the appeal of recurring revenue is preferred. Recurring streams of cash flow to transactional-based models will result in higher valuations.
When launching a subscription revenue model it is best to not take the spreadsheet and manual approach. A task such as this can become both inefficient and risky. Automating payment collection is where companies should begin their subscription economy. Therefore, implementing a system such as NetSuite ERP that can handle automation for billing cycles monthly is the way to go and to maintain an optimal retention rate. This is one of the core reasoning to why most businesses consider Subscription billing and management with NetSuite.
Automation will streamline billing processes and puts subscription and billing data all in one place. Having your data all in one platform will improve data quality and ensure there is accurate billing. Any mishaps with billing can be extremely frustrating for customers and it is a point where you may lose them if you are not managing billing in a convenient way. It is crucial for an impeccable billing management solution to be in place to ensure the best customer service in the subscription-based business model.
Running global operations, communicating with customers in their own language and currencies is important. With NetSuite, you can implement features that will ensure customers abroad are able to purchase the subscription service or product according to their own local standards. This way they can also determine the value of the items while allowing communication to be more personalized. The convenience of NetSuite is that it can provide all of the above.
NetSuite’s billing management capabilities make it the ideal solution that will support the transactions that a subscription pricing model will need. It offers real-time visibility into inventory levels, detailed reporting, and analytics. Billing operations can be automated in addition to subscription management processes, while also helping businesses make smarter strategic decisions that will improve company performance and meet objectives. Not only that, companies can also use NetSuite CRM (customer relationship management) to improve their customer satisfaction and customer acquisition costs (NetSuite can be integrated with third-party CRM applications as well such as Salesforce, HubSpot etc.)
While subscription products and pricing options are appealing, all businesses really need is a system that is capable of streamlining the billing management and more! NetSuite’s billing management can not only support the billing frequencies that a subscription-based company needs, but it is also able to scale when the opportunity for growth occurs, both locally and globally.