The subscription business model isn’t exactly a new idea. Newspapers, magazines, football teams and cable TV providers have long used customer subscriptions as their major source of revenue and key performance indicator of their business.
However, with the proliferation of mobile communications and the internet, the nature of subscription business models has evolved dramatically and has now propagated to most industries. Telecommunications companies forged the way forward and to this day continue to introduce creative offerings for which customers pay recurring, one off or metered fees to access their services. But now almost any company that was previously only selling products is now also selling subscription based services. Cloud-based software, printing services and video-on-demand providers are just a few examples of offerings which have turned traditional commerce on its head. It’s a win for consumers as they now have greater options with how they purchase but also for companies as they can enjoy a closer relationship with customers, constant cash-flow and eventually a greater customer lifetime value. Learn how some companies in hi-tech have approached this transformation here.
Companies soon discover that their CRM and ERP systems are not capable of supporting these new and innovative subscription-based offerings. ERP customizations or home grown systems used to be enough to get by, but are no longer capable of managing the diversity, volumes or real-time capabilities associated with the hyper-connected world. Often, a new billing solution is required to manage the subscription billing processes efficiently and flexibly.
Learn more about why the subscription model renders traditional revenue management ineffective read here.
A search on Google will find many hits for subscription billing systems. But what features are needed to bring the most benefit to companies?
5 key features required for subscription billing systems:
- Agility and flexibility: A billing solution should not require dozens of highly-trained software developers to implement or manage it. Yet, companies need intuitive and powerful tools to create any type of pricing rules imaginable in hours or days - not months. Options must be available for deployment in the cloud, on premise or in a hybrid fashion depending on the customer’s requirements.
- Centralization and convergence: A billing system must be considered the centralized pricing platform of the organization. It has to be capable of supporting all subscription products and services while providing simple integration to all systems that need pricing and customer information (typically in real-time). True convergence across all products, offers, real-time and batch billing processes is required to allow marketing units to create offerings targeted at any customer segment.
- Scalability: A business may release a new subscription service starting with a small number of customers but that user base can quickly explode. Leading billing solutions support tens of millions of subscribers and can process billions of transactions per day.
- Usage metering: Only the very simplest subscription models are based purely on flat recurring fees. Many companies need to meter customer usage to manage pricing, discounts and up-sell options. Usage metering is also important for reporting and revenue recognition. Often usage must be metered in real-time at extremely high volumes.
- Financials and reporting: The solution must provide complete customer financial management and integration with the GL. Reporting and Business Intelligence must be leveraged at real-time speed to monitor the health of the company.
The subscription economy is taking over many industries and it is important that companies have fast, flexible, convergent, scalable and powerful systems to manage their subscription billing processes. The 5 points mentioned above are key features that will ensure that companies reap the most benefits from their investment and have the ability to offer their customers exciting new products and services.
Learn about SAP’s Billing and Revenue Innovation Management solution. Follow us on Twitter @SAPBRIM. Watch the overview video.
