Estimated read time: 4 minutes, 14 seconds
As the head of FastSpring Professional Services, Adam Cohen often gets questions about selling through subscription. We asked him to share his best practices for recurring revenue…
Q. Should I sell through subscription or by one-time download?
A. I think a subscription offering is one of the magic bullets of eCommerce. The recurring revenue model works in so many ways. Usually there is less up-front cost initially for your buyer, so the barrier to entry is less of a hurdle.
By maintaining a relationship with your buyer, you have more opportunities for upgrades and cross sells. Effective subscription management increases the lifetime value of your customers. More importantly future revenue becomes predictable, which I am sure your Finance team can tell you the importance of being able to predict the revenue stream for the coming intervals.
Keep in mind subscriptions are not just for downloadable software sales. SaaS solutions are perfectly configured for the subscription model.
Q. What are the best practices for selling through subscription?
A. As the Director of Professional Services I get to work with many kinds of subscription models. I think the most important “best practice” for subscription management is to remember that, “one size does not fit all”. Subscription models work for huge enterprise clients of FastSpring like Adobe, to business-to-business solution providers like Zebra, to relatively small startups like Plotagraph. You have to know your buyer, know who is using your product, and why they are using your product. You have to stay in touch with your buyer.
My advice is to always offer a subscription model for your product, and offer alternatives. If you are going to offer a monthly subscription, offer a yearly subscription as well for a slight savings. When subscription renewal time comes around, offer your buyer an incentive to renew.
Communicate with the buyer. Ask for feedback. Show them you care.
Q. What is “dunning” and why should I care about it?
A. At FastSpring, “dunning” is a critical part of the subscription management solution. Dunning refers to how you communicate with your buyer through the entire renewal process.
FastSpring not only allows you to customize the messaging itself, but FastSpring also allows you to control when those emails are sent to the buyers. FastSpring has a secure, web-based portal through which the seller can configure a set of emails that are sent to buyers at specific cycles in the subscription renewal process. These emails include reminders that a subscription is about to renew, notices that the credit card on file is about to expire, notices that an automatic payment attempt failed, and notices that a subscription is about to expire because it was not renewed.
We have the ability to send these emails before a subscription expires, when it expires, and even after the subscription expires.
Q. Won’t I lose revenue when customers cancel their subscription?
A. The subscription model works. I encourage all our sellers to try it out. There is a sweet spot for the entry level price, the interval to renew, and the recurring price for your product or service. If done correctly, subscription models can be very successful.
Cancellations are a way of life and I encourage our sellers to embrace them. You know the saying, “keep your friends close, and your enemies closer?” That is how I feel about subscription cancellations. Take ownership of the cancellation process. Understand why your buyers are canceling. Don’t make it a challenge for them to cancel, but use it as a learning experience. Take those lessons learned and improve your product and processes.
At FastSpring we “eat our own dog food.” We use our own subscription management solution to manage our SaaS service subscriptions with our own clients. We try to learn from that process as well.
Q. How does FastSpring help companies sell through subscription?
A. FastSpring provides all the tools for subscription management—a way to sell it, renew it, upgrade it and cancel it at an interval that makes sense. Our goal is to keep subscription simple for our sellers.
I view the FastSpring solution as a “one back to pat” solution. FastSpring handles not only the subscription management process, your downloads and license fulfillment needs, but also taxes, returns, chargebacks, international data privacy issues, PCI compliance, affiliates, etc…all the Merchant of Record responsibilities. In addition, we have built in the currencies, payment methods and languages that work on a world-wide basis. Our model is a success model—as you succeed we succeed.
Other vendors offer very complicated components which may help but are often unnecessary so why pay for these features? FastSpring makes the process of starting and maintaining that recurring revenue stream become an asset, not a hindrance, to the buyer and the seller.
Adam Cohen is the Director of Professional Services at FastSpring. Adam has been involved with eCommerce on the development side of the house since the late 90’s serving as Director of Engineering for a number of eCommerce startups. When he is not creating on-boarding solutions, you’ll probably find him on the tennis court.