A Beginner’s Guide to Subscriptions: Part 3 – Five Common Subscription Billing Mistakes

A Beginner’s Guide to Subscriptions: Part 3 – Five Common Subscription Billing Mistakes
Our ‘Beginner’s Guides’ are designed to help companies build their own successful subscription businesses. In the third and final part of the blog series, Shashank Venkat looks at some common pitfalls in subscription billing and suggests ways businesses can overcome them.

Subscription-based businesses face a lot of challenges, and some of the key areas of friction include customer acquisition and retention. Another area a lot of subscription businesses struggle with is recurring billing. As one of the most important aspects of the customer experience, billing should be unobtrusive, streamlined and error-free.

However, it’s amazing how many companies struggle to get this key aspect of the subscription experience right. Businesses that transition to subscription billing from one-time payments, which are typically associated with product-based business models, often find it hard to disassociate from the older approaches. In this guide to the most common recurring billing mistakes, we provide practical advice so your business can adopt the subscription model with confidence. 

Five Common Subscription Billing Mistakes

Inadequate communications strategy – Many subscription-based businesses tend to focus on sending information about their products or services, but very few actually communicate effectively with their customers before auto-renewal of subscriptions or other details such as price changes. Advance notifications and timely reminders show subscribers that your business cares for them, boosting customer loyalty and reducing churn. You should also include information such as subscription upgrade/downgrade options as well as payment notifications in all your customer communications. In summary, ensure that you have a clear communications strategy in place and don’t forget to use payment receipts to leverage cross-selling opportunities the way Amazon does – it may be an age-old practice, but it is also one of the most important contact points with your customers.
In-house developed billing solutions – A lot of businesses opt for the DIY approach to billing, where they start out building their own solution as part of their service offering. However, this approach leaves a lot less time for your team to focus on the core value proposition and results in the need for continued investment in your billing system as your business evolves. Moreover, many businesses confuse recurring payments with recurring billing, which can seriously restrict your future growth opportunities.

While recurring payment systems can operate independently, someone or something needs to tell them what payments to take. This is usually good for one product one price subscription models. However, if you have multiple services with the need to calculate and combine multiple charges, discounts, tax and any usage or overage fees, you need a recurring billing system. These are the finer details and complexities which are best understood by established service providers in the space. Make billing a competitive advantage by adopting a robust subscription billing platform. Our Cerillion Skyline subscription billing platform is built on more than 20 years’ experience delivering high performance enterprise billing and transaction processing systems.

Underestimating customer self-service – Apart from billing and invoicing, subscription companies also need to pay close attention to customer engagement and support. Self-service is one of the most favoured support channels by customers and can go a long way to improving the subscription experience for your customers. Many customers prefer the DIY approach for accessing information, taking purchase decisions and troubleshooting problems. Your customer services team can then handle the more serious issues and focus on higher value engagements. Ignore self-service at your own peril.

The credit card conundrum – Let’s face it, credit cards are one of the most convenient ways for customers to pay for subscription services. However, inefficient credit card management by the service provider can also be the root cause of many issues. For example, one of the big reasons for subscriber churn is expired credit cards. On top of that, a credit card can suffer from issues such as insufficient balance, loss or theft that stops a payment from going through. You need to have systems in place that can alert you before credit card expiration dates and prompt customers to update their card details. In addition, you also need to send customers dunning emails to inform them of payment failures and encourage them to complete their payment through another channel.

Easy subscriptions, hard cancellations – At the core of any subscription business is a customer-first mindset. If you make it easy for a customer to subscribe to your service but make the same customer run around to unsubscribe, you are doing it wrong. Simplifying cancellations is a great way to send a message to existing customers as well as potential ones, that you do actually care for your subscribers. Be transparent with your customers and offer an easy way to unsubscribe. Furthermore, make sure you stop billing immediately and initiate any due refunds as soon as possible. Customers cancel for many different reasons; by making that process straightforward you leave a good impression, and who knows, maybe they will return as a paying customer again in the future.

Mistakes are inevitable, but as long as you avoid these common subscription billing pitfalls, your business should be well placed to become the ‘Netflix’ within its own niche!

Don’t forget to read our other blogs in the Beginner’s Guide series:
Part 1 – Understanding the Basics
Part 2 – Tracking Key Metrics