Recurring billing is quickly becoming one of the most popular payment systems for many types of companies, regardless of their size or customer demographics. This mass adoption is no accident. As it turns out, offering this reliable, virtually set-and-forget way to get products and services is one of the best solutions for businesses to increase their profits, keep buyers for the long term, and provide a level of service that maintains customer engagement at a high level while streamlining business operations like never before. 

If you are looking to boost customer retention while simultaneously optimizing your internal company operations, read on to learn how subscription billing might be just the innovation you have been seeking.

The benefits of recurring billing.

When you allow shoppers’ payments to be distributed across a period of weeks, months, or even years, this is known as recurring billing. With the help of billing software, it’s a breeze to set up a clear schedule with your client that specifies how much is to be withdrawn from a credit card or bank account, the date and frequency with which it will occur, and the duration of the arrangement. 

This same processing program can then be configured to notify the patron when the bill is due and when a withdrawal takes place and even to alert the person if their credit card is nearing its expiration date. In many ways, it’s like having a very efficient silent partner at your side who successfully handles virtually every aspect of a customer’s payment process.

The advantages of the recurring billing or subscription-based arrangement are numerous. They include the following.

• Predictability. Once the agreement is in place, both you and your customer know exactly how much money will be exchanged, when, and how often. For both you and the shopper, this certainty makes budgeting infinitely easier. As a merchant, it also gives you more control over your cash flow, making it much more efficient to plan for future short- and long-term needs.
• Increases accuracy. When billing processes are automated, the human errors that were once frequently made in the data input and invoicing process will no longer be an issue. Moreover, the system will automatically take over invoicing and late payments notifications, reducing the amount of time you will need to spend chasing late bills. As a consequence, you will have more time to provide the excellent customer service and targeted attention that only a human being can give.
• Makes product purchasing easier. Instead of a customer needing to buy the same thing every month, recurring billing allows an item or service to be provided on an uninterrupted basis with little or no effort on your or the shopper’s part. Automated billing platforms integrate seamlessly with payment gateways that are packed with security features to safeguard cardholder data and keep the entire process in compliance with Payment Card Industry (PCI) standards.
• Boosts customer loyalty. Instead of buying something once and moving on, the recurring payments model, by its very nature, helps to foster a positive, long-term relationship between company and customer. As a merchant, you can use this to your advantage by continuing to communicate with patrons about new products, potential subscription upgrades, and ways to become even more engaged with your brand.
• Furnishes buyers with payment security. Because your subscription billing and payment processing software has authentication, data safety, and other anti-fraud measures built in and is being constantly updated, your valued customers will have every reason to expect that their payment information and personal details will remain out of the hands of cyber criminals.
• Easily trackable payments. Thanks to your billing program, all transaction histories will be stored in the cloud, available for easy retrieval if any issues or questions arise. This is beneficial both to you and to your customer in the event of payment failures and for chargeback prevention purposes.

Understanding the types of recurring billing.

There are two recurring billing types to consider as you think about implementing this payment strategy. They include the following.

• Fixed. In this arrangement, you collect the same amount from your customer during every billing cycle. Gym memberships are an excellent example.
• Variable. As the name suggests, the amount charged can change, usually dependent on the customer’s usage of the product or the quantity they consume. Utility contracts are a typical example of this type of billing.

Implementing recurring billing systems.

As long as you already have built a billing engine or have a payment gateway that provides one, you might only need to partner with a payment processor. However, most companies who expect their business to grow or their sales landscape to become more complex over time elect to invest in recurring billing systems. Among the requirements you will need in order to set up recurring billing are the following.

• A payment gateway that connects your website or app to the bank that encrypts customer payment details and transmits them for payment.
• Support various payment methods to please customers by increasing their choices. Popular types include online debit and credit card, digital wallets, direct debit, ACH, and offline payments.
• Recurring billing software that lets you apply discounts, customize your billing, include and change add-ons, and segment your emails. This adds sophistication and efficiency to your recurring billing.
• Configure your pricing strategies, billing rules and payments. Your recurring payments software provider might give you a place where you can test them before going live.
• Obtain SSL certificates to boost security.
• Choose how you will integrate hosted pages, API, etc.
• Configure your settings for taxes, dunning, and retry payments.
• Customize your invoicing.
• Create email templates and notifications that will be sent to customers at every stage of the billing process.
• Go live.

Pricing strategies for recurring billing.

There are numerous ways to customize your pricing according to your own needs and customer preferences. Some of the most popular include the following.

• Premium plus upsell. You offer both a free service and a paid version that might have additional features or be ad-free.
• Multiple editions. You offer a number of different packages, letting your customer choose which is the best for them.
• Usage-based. This pay-as-you-go plan lets customers pay only for what they use.
• Base plus overage. Customers always pay a set cost each billing period, with the cost increasing if they exceed a set amount of data or products.
• Tiered/volume. You offer different price packages based on the volume a customer uses.
• Bundling. These package deals let customers buy two or more products or services as a single unit instead of paying for each separately. For this to be successful, the perceived value of the bundle must exceed the asking price.
• Segmentation. Based on elements such as volume, service, time of purchase, time used, or other factors, this structure lets you offer the same products or services but at different prices for different customers.

Reducing churn with recurring billing.

It is inevitable that some of your customers will leave, either on purpose or by accident. This is known as churn. While you can never totally stop buyers from unsubscribing, you can lower some of the main churn factors by doing the following. 

• Attracting your ideal customers in the first place.
• Being transparent and providing clear information about all billing details.
• Being memorable and compelling. Keeping your brand on your customers’ minds in a positive way will encourage them to continue with the billing or subscription arrangement.
• Communicating about everything including billing details, received payments, delivery of products or online services, and responses to questions or requests.
• Avoiding so-called passive churn that occurs when someone stops their subscription or billing due to factors beyond their control. Recurring payments software can send alerts about failed payments or upcoming card expiration dates.

Common challenges in recurring billing.

Although recurring billing can boost customer retention and make revenue more predictable, it also comes with obstacles. These include the following.

• The customer’s plan might change, i.e., be upgraded, downgraded, canceled, or renewed. Using a customer relationship tool that integrates with your billing system can help you to remain abreast of subscriber needs in real time.
• Keeping track of details such as payment and account data, sign-up,  and expiration times, etc. for a growing number of customers. Recurring payments software will automate many of these processes.
• Limited flexibility. With a recurring billing solution, you can customize varied subscription tiers and payment plans.
• Failed payments. A payment might not completely go through during processing, or the customer might not make it at all. A top-shelf recurring billing system can keep payments flowing and maximize communications should snags arise.
• Data security breaches. Protecting customers’ payment data is vital. Failing to do so can lead to lost customers and a hit to your brand’s reputation. A secure recurring billing processor will maintain regulatory compliance and store customer payment details safely off-site. Additionally, you should encrypt any data you do store and remain in compliance with all PCI standards.

In a nutshell, excellent recurring billing packages will reduce the likelihood that you will encounter these or any of the other challenges that you will face when using this model. In other words, investing in it is a wise decision under virtually all circumstances.