Subscription services have really taken off in the 2010s. Consumers can now order just about anything as a recurring monthly subscription, from clothing boxes and meal prep kits to streaming music and videos.

According to research by PMNTS, there are three qualities that set the best subscription merchants apart from the rest: speed, security, and choices.

As the number of subscription services offered continues to skyrocket (subscription services were offered on 37 million websites in 2014, a number that grew over 800% by 2017), recurring billing merchants need to get their game face on when it comes to improving customers experience and reducing friction. A focus on those two areas should yield impressive results in the needed areas of speed, security, and choices.

Perfecting Payments Considerations

Card Validation – merchants should consider validating the card details at the time of signup via a $0 or $1 authorization. This ensures that the card data is correct and valid for every subsequent transaction. Also known as a “preauthorization”, it’s a simple way to test out the card without actually deducting money from the customer’s account.

Dunning Management – Subscription merchants must deal with the problem of churn. Customers forget to update payment card details, cards expire, and mistakes happen. When cards decline, subscription merchants need to have a system in place to manage complications. One process would be to auto-send an alert to the customer, notifying him of the declined transaction. The billing system may also retry the charge again after a set number of days. Subscription merchants with large customers bases must have a solid dunning management system in place.  

Use Account Updater Services – these services, offered by the major card brands, banks, and other third parties, allow for automatic payment information updates to avoid a declined transaction due to inaccurate of expired payment card data.  

Offer Popular Payment Methods – Be sure to allow people to pay via their preferred method. Start with the major credit card brands and build out with alternative payment methods and currencies from there. If you cater to an international audience, be sure to offer local ways to pay. In some cases, this may mean offering alternative options like Alipay or Giropay.

Employ a Billing Solution Built for Recurring Payments – avoid hard-coding your own billing solution as a recurring merchant. This can severely inhibit your ability to update pricing to match market demand and to handle issues like chargebacks, refunds, and account credits.

Overcommunicate With Customers – Dunning management shouldn’t be your only interaction with customers. Excellent communication with customers is paramount for subscription merchants. It’s especially important to notify customers of upcoming recurring payments and to alert them to any updates to the subscription. It’s also important to keep them updated on company news and special offers. Since invoices and receipts are another form of customer communication, be sure they are customized and branded rather than generic. The more unique and special your customers feel, the more they will appreciate your brand, building loyalty and increasing customer lifetime value.

Implementing Other Best Practices

Free Trial or $1 Trial – This is an excellent way to give consumers the option to try your product or service at an extreme discount. Low-risk trials improve subscription rates and often get your products or services in front of people who might not have otherwise been exposed to them. It’s a great way to kick-start recurring revenue.

Reviews/Ratings – Including ratings and reviews next to products on your website can present social proof and increase consumer trust in your product. Peer reviews have grown in importance when it comes to making purchase decisions, and it’s always helpful to highlight positive reviews of products and services.

Rewards Programs – Rewards and loyalty programs keep your recurring customers engaged, less likely to churn and less likely to switch to a competitor. Rewards can solidify an emotional connection between merchant and customer, and provide the customer with a reason to continue their relationship with the merchant.  Customers that can earn free gifts, free upgrades, exclusive offers, or entry into loyalty member events are not only going to stick around, but they’re going to spread the word among friends.

Other Tidbits for Recurring Merchants

Many subscription or recurring merchants opt to work with a payments advisor or payment processing company that can help manage and navigate the unique challenges of subscription/rebill payments. In some cases, subscription merchants need to work wtih a processor that specializes in high risk payments, simply because of the nature of the products or services being offered. In any event, working with an expert can help streamline some of the challenges that present for subscription merchants:

  • Need for an intuitive dashboard to track subscription details (cross-sells, upsells, downgrades, and cancellations)
  • Gateway integration with sales & fulfillment systems
  • Chargeback management and representment
  • Payment card declines, churn reduction, and dunning management
  • Multi-channel and multi-currency payments

The benefits of running a subscription business (or adding a subscription component to your existing business) are obvious. Predictable revenue and a regular cash flow is ideal for businesses looking to scale and compete against industry incumbents. Subscription customers are also receptive to upsells and cross-sells, making it possible to increase customer lifetime value fairly easily.

 

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