Last editedOct 20212 min read
More and more businesses are switching to a subscription payment model for a variety of reasons. In some cases a subscription payment makes the most sense because of the nature of the service or product being supplied. If you sell a particular type of food or drink in the form of a hamper delivered every month, for example, then it makes sense to switch to a subscription payment.
A subscription payments model defined
In simple terms, a subscription payment model is one in which the customer takes out a subscription with your business, agreeing to use the goods and/or services you provide for a set period of time – typically six or 12 months. Rather than paying as and when they receive the goods or services, the customer agrees to make recurring periodic payments – that is, a monthly payment of an agreed amount.
A subscription payment model can offer a range of advantages, including the following:
Certainty – once a subscription payment account has been set up for a customer the process of taking the regular payments is fully automated. This means an end to late payments, and the time and effort you’d need to spend chasing them up.
Cash flow – understanding the reality of the income that flows into your business, both now and in the future, is vitally important when it comes to planning any investment or expansion. A subscription payment model guarantees a base line of income into your business and makes it easier to plan with certainty.
Simplicity – the ease with which a subscription payment model works removes an entire layer of bureaucracy from the day-to-day management of a business. Once a subscription has been taken out the payment occurs automatically in a completely secure manner, without the need for further billing, invoicing, or other time-consuming paperwork.
Customer satisfaction – as well as making life easier for your business, particularly the accounts and billing department, a subscription payment model will deliver an enhanced consumer experience for your customers. Once the recurring payment plan has been set up, they can forget about it, and concentrate instead on the quality of the goods and/or services you’re providing.
How to create a subscription payment model
The simplest way to build subscription pricing into your business is to break the process down into small and achievable steps:
Pricing – create a pricing plan that is competitive while still bringing sufficient income into your business. Consider offering loyalty bonuses to those customers who’ve shopped with you over a prolonged period, and research the marketplace to establish what the best pricing point will be. Many businesses – particularly those based online – are switching to a subscription payment model, so try to ensure that yours offers a range of packages and pricing points to tempt the broadest possible cross-section of customers.
Customer experience – make sure that the experience of setting up a subscription payment plan is as seamless as it can be for customers, using the widest possible range of devices to access your business. Multi-channel support – via a website that is equally responsive on smartphones, tablets, and desktops – is vital.
Payment flexibility – make sure that your subscription payment plan can take payments using a wide range of methods, from debit and credit cards to digital wallets and bank transfers. If a customer doesn’t see the method they prefer to use, then there’s every chance they’ll simply look elsewhere.
We Can Help
If you’re interested in finding out more about efficiently taking subscription payments, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.