Estimated read time: 4 minutes, 18 seconds
Subscriptions are the backbone of SaaS companies’ revenue streams. However, as important and profitable as they can be, the implementation of subscriptions is a complex process. There are multiple factors to consider, such as pricing, licensing, discounts, and incentives for potential customers. With this in mind, we are publishing a three-part blog series with the aim of highlighting the benefits, challenges, and ways to implement a subscription model. We’ll take a look at subscription trends in the market and discuss some of the advantages of switching to a subscription business model.
Subscriptions are the Future
Over the past few years, there has been increased interest in subscription services. We’re seeing more and more software providers moving away from one-time sales and transitioning towards a recurring billing model.
Although there is a case to be made for having a reliable, physical product in hand, the massive benefits of the subscription revenue model cannot be overstated. And just what are those benefits? Chief among them are ease of distribution, reliable revenue, and a pro-consumer structure. We’ll discuss each one and see how they’re driving the market.
Ease of Distribution
Distribution has always been a challenge for vendors looking to sell a physical copy of their software. Doing so successfully requires taking into consideration a myriad of factors like shipping costs, buyer location, and any customs or import laws (for international deliveries). Not only that, but customers will begin to expect more support for physical shipping, and your business will need to repeat the process each time you release a new product or version of your software.
On the surface, these costs may seem minor. After all how much harm can arise from spending a couple of minutes figuring out delivery logistics?
But here’s the reality, the resources and time spent navigating fulfillment can compound over time and if left unchecked, can eat up valuable resources that can be better spent growing other parts of your business.
Luckily implementing a subscription business model helps solves all these problems in one swoop. One of the biggest perks of moving your products online and offering access through a subscription plan is that it will help streamline the entire post-checkout fulfillment process. FastSpring’s robust file delivery system allows your customers to quickly get their hands on the latest version of your products by delivering files and software keys straight to their inbox after they’ve completed their purchase.
More Reliable and Consistent Revenue Stream
Another added perk of implementing a subscription model is its ability to reliably predict the revenue that your company will receive. Your customers are now active subscribers of your business, meaning they’re making recurring payments to continue to get access to your software. As a result, measuring the financial health of your company and calculating MRR is even easier since you can expect recurring income to enter your company from these subscription plans.
Having more predictable cash flow also gives your company the confidence to scale knowing that you can depend on a steady stream of income to support your growth initiatives. Avoid the unpredictability of one time sales and start moving towards more consistent subscription payments altogether.
Moreover, since credit and debit cards can expire or be canceled, they are often a source of unintentional churn for software and SaaS companies. Protect your revenue potential by preventing payment failures before they happen. FastSpring’s full-service ecommerce platform comes pre-equipped with a variety of dunning management features to help your company stay connected to subscribers, manage accounts, and reduce churn. With FastSpring you can:
- Automatically notify customers that their payment card is about to expire and send out reminders for subscription contract renewals.
- Easily engage with delinquent accounts through electronic invoices and collection reminders.
- Streamline the upgrade path of free-trailers to a paid subscription.
A Pro-Consumer Focus
The most successful software and SaaS companies understand that building long-term relationships is the key to profitability. Implementing a subscription model helps shift the focus away from customer acquisition and more towards customer retention.
FastSpring’s ecommerce platform offers support for a variety of subscription structures so you can easily build pricing models to meet the changing needs of customers around the globe. Tiered pricing structures, add-ons, and cross-sells give your customers the flexibility to pay for the products and services they need and nothing they don’t, further reducing churn.
In addition, with support for over 22 currencies and 25 languages, FastSpring’s platform allows your customers to choose how they pay for your subscription products and services.
Making the Most of Your Subscriptions
Interest in subscription-based revenue models will only continue to grow as more software companies discover how implementing recurring billing can help them maximize their revenue potential and foster long-term relationships with their customers. With that being said, the benefits of the subscription model do not necessarily mean the system is without its own challenges. Customer incentives to subscribe, retention, and cancellations are continual hurdles that SaaS subscription businesses must face. In our next blog, we will be discussing those very challenges and strategies your company can take to ensure you’re making the most of your subscriptions.