Subscription businesses are booming in emerging markets such as India, Brazil and Mexico. So, what are the key things that companies should keep in mind about subscription billing in emerging markets? Shashank Venkat finds out
For a lot of subscription businesses, emerging markets seem to be the next big growth driver. A big reason for this shift in power towards emerging markets is a burgeoning population which has access to low cost data services and is hungry for the latest products and services. While the different nature of these markets brings forth unique challenges, there are lots of opportunities for innovation and growth.
Take the example of Netflix which has just captured the imagination in India with its first Indian-produced series titled ‘Sacred Games’. Netflix CEO Reed Hastings views India as the next big source of revenue growth and is gunning for the next 100 million subscribers from the country alone
. Meanwhile, music streaming giant Spotify has also reaped dividends from its presence in the emerging markets with Mexico and Brazil
among its top four markets. The company is also set to launch its service in India
So, if you are a subscription business looking to launch in one of the emerging markets, here are five things that you need to know:
The currency conundrum –
As this Forbes article
points out, one of the biggest challenges you will face while launching a global subscription business is the billing currency. While it may be convenient to fix the price in USD, the constantly changing price in the local currency doesn’t lend itself to a good subscriber experience. A stable subscription billing experience, priced in local currencies, is the best bet to build a subscription business in the emerging markets.Subscription businesses have to take this volatility in their stride and even large businesses like Netflix are not immune to it. In the recently released second quarter revenue report by Netflix
, which was largely underwhelming for Wall Street analysts, the company cited the strengthening of the US dollar against other international currencies for its weak international revenues.
Pricing for emerging markets –
Your subscription pricing strategy depends on a lot of factors. It needs to be just right to ensure that you are balancing the money spent on your business with customer expectations and profit. Moreover, for any new subscription business which is now competing in a typically crowded market, customers will compare the price to value before parting with their hard-earned pesos, rupees or reals. Subscription pricing must therefore be adapted to the unique conditions of each market. This article
has some great pointers for deciding on a pricing strategy for emerging markets. While it is targeted towards multinational corporations, the key takeaways for subscription businesses include understanding local perceptions, creating pricing ladders with low bottom rungs, and following a pricing strategy according to the business lifecycle in the market. Amazon’s Prime launch in India is a great example of the above, where it started offering the subscription bundle for as low as Rs 499 ($7.30) per year as part of its introductory offer. Currently, Prime is priced at Rs 999 ($14.62) annually, still substantially lower than in the US where it is priced at $119 per year. Recently, Amazon also started offering Prime at Rs 129 ($1.89) per month.
Overcoming regulatory obstacles
– One of the big challenges for subscription businesses is complying with ever-changing regulations around the world. Some of the regulations may impact their global operations, while others might be more local in their impact. For instance, the General Data Protection Regulation
has had a huge impact on all businesses with subscribers in Europe. Other regulations such as Australia’s Consumer Data Right legislation
and California’s Auto Renewal Law
have also affected the way companies manage their processes locally. Apart from these regulations which impact subscription businesses directly, there is plenty of other legislation which can also affect your business. For instance, when India enacted the Goods and Service Tax (GST) law last year
, it required a massive overhaul for businesses from an operational standpoint. All these different regulations impact subscription billing in significant ways, and it is imperative for businesses to stay on top of the regulations. It might not be a bad idea to engage with local partners to help you stay compliant with the local laws.
Managing recurring billing –
This is also a key challenge for many businesses wanting to go global. Payment infrastructures and local preferences vary so widely across countries that it is impossible to have a one-size-fits-all model for recurring billing. The local payment providers in many countries do not have the capability to support recurring billing. Moreover, a lot of these emerging markets depend on innovative financial instruments like wallets and mobile payments. More tech-friendly countries are also open to newer financial paradigms such as cryptocurrencies. Companies therefore have to be creative and accommodate the unique needs of each country for recurring billing.
Scaling with a robust subscription billing platform –
A lot of companies set out to build all the elements of their subscription business from scratch. However, the DIY approach isn’t suitable for most businesses. Launching subscriptions in newer markets comes with its own set of challenges and it is better to focus on the core business proposition instead of the billing infrastructure. Seek the help of partners with extensive experience in recurring billing and transaction processing systems across multiple geographies. We encourage you to try out Cerillion’s subscription billing
platform which is built to propel subscription businesses towards growth.