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The secrets to a powerful subscription payments business

Published March 8, 2021

If you aren’t using a subscription-based payment system—or you need to fine tune one—now may be the perfect time to make the change with the recent boom in ecommerce.

As reported by Forbes, while retail sales as a whole have declined, by the end of the 2020, global ecommerce was projected to reach 4.9 trillion in sales—the largest ecommerce jump ever in a single year. The U.S. and Canada alone have seen a 146 percent growth of all online sales.

The reasons are easy enough to understand: consumers feel safer shopping from home and brick and mortars have had to take their business online to increase their sales. And while this is generally good news for ecommerce retailers, the space is getting tight—and so is competition.

That makes how you interact with your customers all the more important—and that includes your payment process. And, the benefits of subscription services shouldn’t be overlooked. Not only do you save time and resources with recurring payments, but you can also use them to build relationships with your customers.

Related: Traditional and online shopping trends show consumers are in charge now more than ever. Here’s how retailers adapt. 

How subscription payments benefit your business

With the support of an independent sales organization (ISO) and an independent software vendor (ISV), you can create a subscription payment system that’s right for your business. ISOs provide the terminals and ePayment support, and ISVs handle the software side of things.

Once you have a subscription payment system in place, here are some benefits you can expect:

Stronger customer retention

It’s an understatement, but online customers do have a lot of choices; they’re bombarded with new products and services daily. (When was the last time you didn’t receive some type of ad simply by turning on your computer?) So, retaining your customers is a challenge. But subscriptions can help you keep them: If they’re already paying for a regular service from you—and they’re happy with what they’re receiving—they're much more likely to stick with you.

Recurring revenue adds value to your business

When your customers sign up for your subscription (for whatever service or product you choose to offer), you’ll be receiving automatic payments that you can count on. The value that brings to your business can be huge. In fact, according to Value Builder System creator John Warrillow, it can increase the overall worth of your business.

“The more guaranteed revenue you can offer a potential acquirer, the more valuable your business is going to be," Warrillow says. "Because a high percentage of the revenue of a subscription-based business is recurring, its value will be up to eight times that of a comparable business with very little recurring revenue.”

Increasing profits and growing your business

Recurring payments don’t just add value to your business, they also obviously help you increase profits. When you have predictable, reliable incoming revenue, planning is easier. And with less time and fewer resources spent on trying to collect payments or resolve billing issues, you can focus on other aspects of your business. Whether it’s making staffing adjustments, adding more products and services, tackling operational inefficiencies and more, subscription payments give you the time and resources back to focus on the bigger picture.

“Because a high percentage of the revenue of a subscription-based business is recurring, its value will be up to eight times that of a comparable business with very little recurring revenue.” John Warrillow, Value Builder System

Building customer loyalty

Your customers crave engagement; it’s something they get pretty much everywhere they go. They want to feel like you know them and that you care—and your subscription service can make serious inroads there.

Say you’re a customer who belongs to a wine club and your finances have tightened and you need to cut corners. You might be tempted to cut that $100 you spend every three months. But, if you’ve come to not just enjoy the wines, but also the relationship with the wine club itself and value it as an experience that enriches your life, you might look for something else in your budget to cut.

Keep reading: Young consumers value experiences more than just products. See what your Gen Z customers want from you.

If you’re the company behind the wine club, you’ll want to keep specially preparing your shipments so the service hits the mark every time and keeps rewarding your loyal members so the subscription becomes more valuable over time. 

The benefits of subscription services for your customers

Any time you can add value to the services and products your customers crave, it’s like giving them a bonus—and it’s one you can take to the bank.

Capitalizing on convenience

Convenience is what drives customers to shop online in the first place—and not having to lift a finger to keep receiving your product or service via subscription is the ultimate convenience. It’s something you can’t put a price on, particularly after 2020; if you thought consumer demand for convenience was high before the pandemic, it’s on a whole new level now.

That now includes payments. Even having to open an app and tap a few buttons to make a mobile payment is an extra step that, with subscription payments, they don’t have to take. So giving your customers the option to set up automatic, recurring payments for their subscription means they don’t have to do anything to keep getting their favorite products and services.

What kind of subscription payment is right for you and your customers?

There are ways to offer subscription payments that can vary quite a bit, so it’s worth your time to think about which one suits your business and your customers the most. Here are a few:

Replenishment—just fill it up.

This is a good option for businesses that sell more basic items like cosmetics, hair and skin products, vitamins, pet food and the like. If your customers want an easy, convenient way to get regular shipments of products they use frequently, this is a predictable, reliable system that works for you (it’s the easiest to fill and the most straightforward) and your customers (who now don’t have to make a trip to the store every month to get their go-tos).

Curated—get creative and engaging.

If your customers want variety—and surprises!—the curated subscription box can be the way to go. Each month (or whatever frequency you offer and they choose), your customers receive a box from you that contains items you know they’ll enjoy. The element of surprise combined with the thought you put into the shipments can be a big boost to customer loyalty.

Access—open the door a world of awesome.

While not as common as replenishment and curated subscriptions, access subscriptions can bring a lot of value to your customers. A good example of it is Amazon Prime. For either a monthly or a yearly fee, subscribers gain access to Amazon Prime and every order they place has free shipping. Consumers might have thought twice about the value of that a year ago, but in 2021 and moving forward, there is a clear cost savings for them. And Amazon can rely on receiving the revenue month after month or year after year.

VIP—make them feel special.

Another route you can take is to offer select services and products that are only available to VIP members. Many consumers value exclusivity and they’ll pay to get it, especially if you make it worth their money. This subscription payment service is another way to really engage with your customers. It involves a decent amount of planning and upkeep—but the ROI could be worth it.

Avoiding common pitfalls in subscription payments

The benefits of subscription payments are clear for both you and your customers. But just like everything else that comes with running a business, there are operational things to consider.

Making it flexible

Inevitably you'll likely want to make changes to whatever subscription payment you choose for various reasons. Maybe it’s not being well received, and you realize it wasn’t the right option for your customers. Or it could be something seemingly small, like providing add-ons. That would require rewriting your billing code, and that’s not so simple.

With any changes you make, you’ll need to make sure it doesn’t affect any other aspect of your subscription system. Make sure you work with your ISO and ISV to ensure that it's flexible.

Giving customers payment choices

With all the various ways your customers like to pay (and the easiest and most secure is always the best), you’ll want to give them as many options as possible to pay for their subscription. After all, they’re giving you permission to deduct a certain amount of money in some way from them every month, few months or annually—so give them the choice of how they pay for your products or service. If you don’t, they just may decide to go somewhere else.

Be prepared for declined forms of payment.

According to major credit card companies, an average of 15 percent of recurring payments are declined for various reasons. That’s why it’s vital to have back up payments and alerts ready to send to customers when payments are declined. With good planning, you can rely on automation to stay on top of the declined payments. 

Making your payments process work for you and your customers

How you receive payments may have seemed like an afterthought in the past. But today, it’s clear that subscription payments can do a lot for your business. By choosing a trusted ISO and ISV to help you implement whichever type best suits your business and your customers, you can start reaping the benefits—and may end up wondering why it took you so long to get in on subscription payments processing.

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