According to Zion Market Research, the industry for billing and management of subscriptions was worth $6.03 billion in 2020. And with an estimated annual growth rate of over 15%, that revenue is predicted to soar, reaching more than $15 billion by 2028.
What's fuelling this phenomenal growth? Customer retention, in brief. In the face of fast change, the stakes for businesses striving to remain relevant and draw customers back are higher than ever. Legacy billing systems have started to lag as subscription models have evolved from being a "nice to have" to a "must have" for businesses in almost every industry, and the demand for sophisticated subscription management systems has increased along with it. The following five factors fuel that need:
The expansion of subscription models
The media and entertainment vertical has had the most significant increase in the subscription market over the past few years. Even though this trend was already well-established before the epidemic, movie theatre closures forced audiences to seek out other forms of entertainment while companies looked for new venues to distribute their pictures. Nowadays, media and entertainment—from TV and movies to music, podcasts, and news—drive a sizable chunk of demand for subscription models.
Of course, there are other sectors of the economy where subscription models are flourishing. The fascination with subscriptions was already prevalent prior to the pandemic; research indicates that from around 2002 to 2021, the subscription economy increased by more than 435%, but the virus undoubtedly sped up that expansion. The convenience of subscription services to supply everything from groceries and other needs to apparel, hobbies, and more was enthusiastically embraced by consumers. Even with the return of in-person shopping, many companies are still having success attracting clients by using these recurring models. According to research, up to 75% of direct-to-consumer firms will really offer subscriptions by 2023, and subscription and payment management software is enabling them to expand these programs.
Value-Driven Customer Focus
Customers' attention to value is another trend that has exploded in popularity. Many people were worried about their financial situations because of the recent economic instability, and inflation has forced them to further limit their budgets. Because of this, it is more crucial than ever for customers to be able to buy—and pay for—only the things they need and want. This increased demand for subscription-based business models as people looked for cost-saving opportunities with product-as-a-service offerings. However, it also raised the demand for pay-per-use and other usage-based subscription alternatives. These methods allow clients to customize their purchases, so they only pay for what they actually need at the time.
In a recent post, we used the example of a gym subscription to demonstrate this idea: Whether you regularly use the gym or not, you must pay $65 or more per month under the basic subscription arrangement. Therefore, the "cost-per-workout" calculation starts to make the membership feel unnecessary when your circumstances change one month, and you start skipping more days than not. But what if you could just pay for what you need, rather than having to pay $65 a month regardless? The fees may be assessed daily, per piece of equipment utilized, per minute, or per representative. No matter how it's computed, you only must pay when you use the facility to exercise. This guarantees that clients receive the most value for their money.
Additionally, the lower barrier to entry for firms encourages clients to remain loyal despite the change. However, these more flexible models' complexity—with various payment structures for each customer—necessitates more complex billing capabilities than most legacy systems can offer. Smart businesses are using sophisticated subscription billing and administration technologies as a result to satisfy client demands.
Market Needs for Flexibility and Agility
Businesses that want to prosper must be nimble enough to pivot quickly in a setting where the only constant changes. In the past, forward-thinking companies—those that aim to succeed—have continuously improved their business strategies to boost profits, expand and fortify their clientele, and enhance their market share. And that's especially true in today's unstable economic climate when innovation for many businesses is now more about survival than it is about development.
Even the most cutting-edge business models and offers, however, are constrained by one crucial factor: whether the organization has established the groundwork for adaptability with a billing system that can swiftly and effectively roll out these new goods, services, and pricing structures. Since they result in expensive errors and delays, manual processes, Excel spreadsheets, and antiquated billing systems are now a serious liability. On the other side, subscription billing and administration software enable organizations to rapidly and easily set up new business models and automate their most time-consuming business procedures, keeping up with whatever the market throws at them.
Client Retention
Customers are carefully considering where their money is going and where their value is coming from, making it more challenging than ever to reduce churn and maintain customers over the long term. While adaptable business models help to keep clients coming back for more, it's equally crucial to guarantee a smooth charging process for each client transaction. This entails providing clients with accurate bills that are timely, simple to understand and make payments straightforward. But there's more to it than that. Businesses need to be able to spot the signs of impending churn to re-engage and keep customers.
A difficult or annoying billing procedure is likely to turn customers away, but a proactive retention plan may keep them completely committed to the brand. Billing is a crucial part of the customer experience. Businesses can make sure customers leave every transaction satisfied with their service and willing to buy again from the same brand by minimizing friction, minimizing disagreements, and providing value at every turn. Once again, antiquated procedures thwart efforts to keep customers, and astute businesses look for advanced billing solutions intended to raise client lifetime value. These technologies can find new chances to market to existing clients while also reducing churn through comprehensive customer behavior analysis.
Security of Data and Regulatory Compliance
The discussion about data privacy is not new, but it has been increasingly heated in recent years as companies have begun to collect larger amounts of user data and use it in more varied ways. Businesses are under more pressure to adhere to both legally and ethically mandated best practices for data security because of growing customer pressure to keep data secure and growing regulations aimed at achieving the same goal. While individual organizations are ultimately responsible for the compliance, subscription and billing management solutions can include built-in features and procedures that can significantly lessen the effort.
Microsoft’s New Commerce Experience was launched in November 2019 in the Cloud Solution Provider (CSP) program to help partners expand opportunities for business growth. The latest changes in 2021 introduced perpetual licensing in CSP, seat-based products for Microsoft 365, Dynamics 365, and Power Platform.
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