Netflix has set the bar high, and not just as an early player in the DVD rental and streaming video space. The company’s model of charging customers a flat, all-you-can-eat rate for unlimited discs and digital content essentially changed how companies look at recurring revenues as a way to bolster their bottom line.
The subscription-based model is now found everywhere. Newspapers and magazines have been running on that model for years, and we see some popular physical world subscription models like themed monthly boxes delivered to your door or gym memberships, but the challenge is on the digital side and what it means for traditional communications billing systems.
On the surface, it appears to be a no-brainer to bill for an ongoing subscription, but in reality it can be as complex as some of today’s communications services. For example, while many subscription-based services charge a fixed rate for a specific period of time, there are plenty of other services that could technically be considered a subscription – that is, the customer has an ongoing relationship with the vendor – but are used on a much more sporadic basis.
Or it could be a situation where a company lures customers in with a free trial period and then upsells them to a regular account. There are also cases where within a subscription model, pricing for a particular service may vary depending on what is consumed, when, where and how. And don’t forget that billing has to keep up with customers who may want to upgrade or downgrade their plans at any time or change the number of users on a software plan.
These scenarios require a billing system that’s quick on its feet and can accommodate all types of pricing schemes (including traditional usage-based postpaid models) and potentially fast changes without a lot of – or any – human intervention. We’re seeing a new breed of billing vendor popping up that caters specifically to the subscription-based market, and some of them just might give the big, established guys a run for their money.
Names like Aria, Chargify, Monexa, Recurly and Zuora are making a splash, especially among companies that have to charge for services regularly. Not surprisingly, many of these and other solutions out there are SaaS-based, making it even easier for smaller organizations or newer entrants to the market that don’t have a legacy billing system to get up and running without IT expertise on staff or having to shell out big money for a full-featured software package.
Interesting and innovative pricing will continue to be a critical differentiator among organizations that want to capture customers and keep them on board. Subscription-based services give companies that critical recurring revenue while keeping the customer in control of what they use.