Subscriptions and Recurring Payments
September 14th, 2020
Most consumers are familiar with the idea of subscription payments. Perhaps you have your own experiences where you have a pest control service that bills you quarterly. Or you pay a monthly fee for your gym membership. Maybe you visit the chiropractor and have a payment plan set up that bills you.
Subscriptions are accepted models of payments that consumers are familiar with using. Now imagine if you, as a merchant, could set up that model for your own business. You may offer dental services, medical service, lawn care, spa packages, or almost anything else.
Setting up payment plans or recurring payments significantly benefits the merchant and the consumer.
- Retention: The subscription model retains customers for ongoing business. Rather than having to reach out each month to invite customers back to your business, the subscription model keeps generating income. In a service-based business, the consumer keeps receiving the service month after month. Reducing customer churn rate also increases your bottom-line profitability.
- Simplicity: In this model, the consumers do not have to make a repeated purchase every month, and the business does not have to solicit any orders from existing customers. The customer receives the goods or services, and your accounting department doesn’t have to generate a new order and create a bill. Customers are familiar with recurring billing and how the payment plans work.
- Trial Offers: You’ve seen this model used before. Try it for free for 30 days! You introduce customers to your product without a full commitment. Especially if you are launching a complex product or service, customers will be more willing to pay if they aren’t obligated to commit. The software as a service (SaaS) industry often uses this method. Use the software for the trial period and then subscribe to the monthly plan. Customers complete the majority of the learning curve with relative ease. And if even if the customer doesn’t convert, you will have their sign up information to use for newsletters or other offers.
- Manageable Payments: Paying $25 a month sounds better than losing customers to a potential barrier of paying $500 upfront. If your product or service requires more money upfront, consumers may be more willing to make monthly payments. Another use case is that unexpected medical bill. Consumers are more agreeable to monthly payments rather than struggling to come up with extra cash.
- Upsell or cross-selling: Once the customer has become accustomed to the recurring cost, adding additional features or upgrades is the next step. McDonald’s employees are known for saying, “Do you want fries with that?” Consumers expect the upsell, and your business can offer that, too. The lawn mowing company can ask, “Do you want pest spray added today? The dental office can ask, “Do you want to schedule teeth-whitening?”
Whatever type of business you have, adding subscription services into your offerings will provide more opportunities to offer convenience for your customers. Take advantage of services or products you sell that could be part of a monthly subscription and see how your sales will grow.
Recommended For You
Stripe’s increased transaction rate goes into effect this week. You can be certain other payment processors are watching closely to determine if they too will increase their rates.
Paying your distributors in a timely manner is vital to the success of any direct sales organization. Late or infrequent payments can decrease motivation to sell your products, which can damage your reputation and bottom line.
Everything You Need to Know About Embedded Payments, but are Afraid to AskAugust 15th, 2022Embedded payments has become a hot topic in the SaaS world. Many SaaS leaders don’t understand what...