There are thousands of businesses selling various types of subscription boxes on the market, but they all share one thing in common: subscription billing.
Properly managing your subscription billing is a vital part of ensuring success, especially during seasonality in business. The subscription box business model relies on your ability to automatically charge your customers on a recurring basis.
Read on to learn how subscription billing and payments work, the different tools you can use, and our recommendations for subscription billing software.
How to Accept Subscription Payments
Subscription payments, also called recurring payments, are automated payments that a business collects on a preset schedule. Since these payments are more complicated than one-time payments, you need to have the right infrastructure in place to request and accept payments online--including being PCI compliant.
There are a few ways to bill and accept subscription payments. These include buying a platform with integrated billing software, using third-party payment processors, or manually sending recurring invoices. Automated billing can help streamline your operations and is more convenient for your customers since no action is required on their part once the subscription has been set up.
Subscription Payment Service
A subscription payment service is a subscription commerce payment gateway provider that bills, collects, and processes subscription payments. These services may be stand-alone products or a part of a more robust online marketplace or platform. The important thing to look for is a payment service that explicitly handles subscription payments, as they require more management.
Subscription vs. One Time Payment
Subscription and one-time payments both increase a business's revenue, but the subscription model is shown to have a few additional benefits.
One major benefit is profitability. Research has shown that subscription models are 200% more profitable for businesses than comparable one-time payments. This is because the model is much more efficient and customer value is much higher. Billing and payment processes can be streamlined through automation and customer retention becomes a breeze due to perceived value.
According to Forbes, acquiring a new customer can cost up to five times more than maintaining an existing one. Subscription businesses have a much higher retention rate and lifetime customer value than other models. This creates a base of existing, long-term clients that continue to make a business money and keeps their profit margin high. Some of the best subscription box ideas benefit from this model, including clothing, makeup and jewelry boxes.
Subscription Payment Model
The subscription payment model allows businesses and customers to automate their transactions and establish a recurring billing and payment plan. This payment method comes with a lot of upside for both the business and its customers.
Customer Benefits of the Subscription Payment Model
Customers see many benefits from the subscription payment model. Their happiness with the model is the driving factor behind its increased growth and adoption by businesses.
Here are the top three customer benefits of the subscription payment model:
Customer Cost Savings
The biggest benefit of subscription payments is cost savings. This happens in two ways. First, the customer saves directly from purchasing the subscription box as they are priced lower than the individual prices of the products they contain. Second, most businesses allow customers to pay for multiple months at a time at a lower rate than the monthly rate.
The subscription payment model is very convenient for customers because it is an automated system. They don't have to remember to place an order before they run out of a product or go to a store to buy a replacement. For example, if you know your family consumes one bag of coffee per week, you can have a weekly coffee bean subscription automatically delivered to your home on a set day of the week.
Low Barrier to Entry
Since subscription payments are lower than ordering products outright, customers are more likely to be willing to try new products. They can order products in smaller quantities and hop around options to find the one that fits best with their lifestyle and that they can afford.
Business Benefits of the Subscription Payment Model
Subscription payments have grown to an over $15 billion industry. This model is attractive to businesses of all sizes due to the many benefits it offers.
Here are the top three benefits for businesses:
Increased Customer Lifetime Value
Subscription payments greatly increase a business's overall customer lifetime value. That's because customers value compounds each subscription cycle. Unlike the traditional model where a large portion of customers are one-time buyers, subscription buyers are intentionally repeat customers.
Valuable Customer Relationships
The subscription dynamic means that the business and customers are in contact far more often than in other models. The business can get feedback regularly and make small adjustments to ensure customer satisfaction. These changes also provide great tools to use for DTC marketing.
With subscription payments, the business doesn't have to work as hard or spend as much to acquire customers. This means it's a lot easier to track eCommerce analytics and set achievable KPIs. Less volatility in ROI means higher revenue.
Subscription Model Billing
Subscription model billing, also called recurring billing, requires customers to make payments to the business at regular intervals.
Usually, the business will choose to use automated subscription billing. It saves time and money for the business while adding convenience for the customers. This is done by using subscription billing software or an eCommerce platform with built-in subscription payment capabilities.
Subscription Billing Software and Platforms
There are two main types of subscription management software you should be familiar with: on-site and Software as a Service (SaaS).
On-site billing software is installed and controlled by employees of your business. This is the traditional model and is becoming less popular with eCommerce businesses because it requires training and dedicated employees to manage it.
SaaS billing software is a "hands-off" software solution. The third party provider of the service manages the platform and infrastructure for a nominal fee. If you use a headless eCommerce platform, this is a great option.
Best Subscription Billing Software
The best subscription billing systems are the ones that provide the most flexibility and meet the needs of your business. They also need to be able to be integrated into your subscription website.
Here are the five best subscription billing software options:
- BlueCart Subscriptions. For food suppliers, our cutting-edge, all-in-one eCommerce platform is a must. It comes out of the box with integrated billing capabilities and everything else you need to be successful, with none of the hassle. It was designed to grow food sales for businesses of all types and sizes. From groceries, to pantry items, non-perishables, and pre-cooked meals. It's a great tool to increase eCommerce sales and we can even help you break into the dropshipping market.
- Stripe. One of the most well-known billing software providers, Stripe can be integrated with nearly any eCommerce platform. Setup is quick and easy, and they have different pricing tiers based on business size. It's second on our list because the fee for each transaction is a bit higher than most.
- Salesforce. Though Salesforce is mostly known as a sales tool, they also offer a billing platform called Quote-to-Cash. It's a great choice for any business already using Salesforce, and comes with an array of analytics tools to help you optimize your sales process.
- Chargebee. Chargebee is a SaaS billing platform designed specifically to handle recurring payments. It can be integrated with all the leading billing gateways and has automated invoicing, collections, and customer management, It's a great option for smaller businesses or entrepreneurs.
- Zoho Subscriptions. Our final choice, Zoho Subscriptions is a simple billing solution designed for small businesses that want to automate their subscription process. The entire customer life cycle can be managed with Zoho, from sign-up to payment collection. It's much more bare-bones than the other options, but is an ideal choice for the entrepreneur who is just learning how to start a subscription box or has a very small staff.
Pay Me Once, Shame On You
Now that you know all about subscription billing payments and gateways, you can focus on growing your bottom line. Subscription billing and payments are a great way for a business to increase their customer value. It can be fully automated and used to supplement an existing eCommerce business plan.
Now that you understand how to get paid for your boxes, you should look into acquiring products from reputable subscription box suppliers and creating well-designed custom subscription boxes that you can sell with a high margin.