How To Make Subscription Services Work

We specialize in the development and deployment of IT systems that support subscription models. That means we’ve seen what makes those models succeed or fail. Today we’re passing on some of that expertise.

Companies the world over are seeing the value of the recurring billing found in subscription models. Companies like IBM have realized how much value there is and are no longer purely a hardware business – they offer a huge variety of digital services on top.

Data is critical in understanding how to launch a successful subscription model. To give an example, the Financial Times was one of the first online papers to go for a fully digital, paid service. They invested a lot of money into analysts to find out how their consumers were engaging with the paper. It was then possible for them to be confident in the shift to a digital subscription and be able to craft subscription options that matched what readers wanted to see.

Let’s be clear – not every company can offer a subscription model. But those that can need simple steps to start the process of developing a sustainable model. Today, we’re highlighting those steps, and in the coming weeks and months, we’ll be delving deeper into each point to give you a complete breakdown of how to make subscription services work.

Pricing and Packaging

Just like the FT you need to design your services around what customers are willing to spend and not the other way around. Some companies remain in a kind of trial phase and want to give new services or initiatives almost for free, trying to justify it by saying it’s giving the customer more value. This isn’t sustainable and the more defined your offerings are the easier it will be for customers to find what they want to spend their money on.

Subscription Sales

You need to get your salespeople to think and behave differently if you’re reinventing yourself by offering digital services that previously were a part of one-off sales. Given that sales commissions will change with your new model, sales managers need to be aware of commission structures and how they encourage sales team members by paying out incentives for securing transactions with recurring income.

Subscription Billing & Cash Collection

You should use several different billing techniques if you want your model to be successful. While monthly plan subscribers are more likely to unsubscribe they’re also more likely to stay subscribed if the cost is negligible to them. You won’t fully transition to the subscription economy if you only give subscribers the chance to pay annually. The point of subscriptions is to provide convenience so give your customers at least one monthly payment option.

Subscription Accounting

There are key differences between subscription accounting and regular accounting practices. What you want is a subscription billing engine that will create a sub-ledger and provide you with all the required information. Whether it’s an ERP system or a dedicated finance software platform they’re often built to support subscription income as a secondary revenue source – you need it to be built with subs as the focus.

Mindset Is Everything

There are of course technical challenges to implementing an effective subscription model. However, most businesses struggle with cultural change over anything else. It’s all about changing the mindset of your people to match the new way that you charge for your products and services. Once you’ve got that covered, you’re ready to get started.

Looking to put a subscription service in place? Talk to the experts today – Subscription Factory.