When was the last time you enjoyed getting your wallet out? It is generally acknowledged that us consumers do not like paying. Actually, to be more specific, we do not like being present in the moment of paying. Why? Quite simply because the act of transferring out hard earned cash to a merchant or service provider is a negative experience. Luckily more and more companies are adopting business models that overcome this issue.
Why does ordering an Uber seem so effortless and painless? Not simply for the ride quality. Rather, it’s because at no point during the journey does the customer actually have to pay. No money changes hands, no card is swiped, no change is given.
The genius of such a model is not just in creating a pleasant consumer experience or a better way to pay. It is that Uber found a way to hide the conscious step of payment entirely. Simply linking a payment card to an account at sign up is the only time a customer will actively think about the means of payment. Every journey thereafter is rendered effortless because, with payment automatically deducted following a ride, the psychology of payment itself has been removed from the equation.
Uber is not the only company taking the pain out of payment. One of the easiest ways to take conscious payment out of the equation is through adopting a subscription business model. Subscription economy is booming. An estimated 68 million people are now paying a music subscription around the world, which is far more appealing that paying for every song or album. iDTGVMax, a yearly subscription offer launched by France’s national rail network, which is capped at 10 000 subscribers, sold out in 24 hours this year!
From traditional subscription services such as magazines, music and on-demand TV, to less convention subscriptions such as razors, socks or marshmallows (yes you read correctly, you can subscribe for marshmallows!), subscription is everywhere! With subscription services popping up left, right and centre, and more and more companies changing their business model to meet this new mode of consumption, how can you ensure that your subscription business succeeds in the long term? Here are our top tips for a subscription business…
1) Ensure a frictionless onboarding process
When onboarding consumers for subscription payments you need to make the process as effortless as possible.
This stage not only sets the tone for your relationship with the customer, but any glitch, confusion, lack of clarity or trust can lead to the ecommerce nightmare that is cart abandonment! Technical and practical aspects play an important role in creating your checkout. Keep it simple: 21% of consumers who leave without paying do so because the process takes too long! Subscribers don’t want to go through unnecessary steps to subscribe, so make it quick and easy. Firstly make sure your calls to action are clear and prominent on the page. A progress indicator bar is also a good idea to inform subscribers of how many more steps are left! Furthermore, make sure that they can easily return to previous steps in case they want to change anything.
When processing to the payment step consider using an iFrame. Giving the customer any impression that they have left their trusted merchant site to go to an unknown third party provider to process the payment causes friction in the customer journey.
Once signed up, make sure you have a well defined welcoming process with initial guidance if necessary. For example, if you have any videos or documentation on how to get more out of the experience.
2) Take payment by whatever means necessary
Hiding payment doesn’t mean ignoring it. Every business needs to get paid. Part and parcel of making customer experience better is giving them as many payment options as possible. After all, if you support PayPal, Direct Debit and credit card, you are tripling your chance of securing custom.
Companies must be as adaptable as possible in order to meet consumer payment preferences. It is worth noting that direct debit is one of the most appropriate payment methods for paying subscriptions, as it avoids problems associated with other payment methods that can lead to cancelled subscriptions and lost revenue (expiry dates, fraud, payment limits, etc).
3) Create a relationship with your customers
Recurring and predictable revenue is a great advantage that the subscription model brings to businesses. Once you have customers onboard it is important that you keep them, bear in mind that it is way more cost effective to retain customers, than acquire new ones. One of the most effective way to instill loyalty in your customers, in addition to providing a great service/ product, is creating a relationship with them. The key to creating a relationship is communication, and do this effective you firstly need to invest in a good CRM. In addition to other advantages, a CRM will enable you to centralise all your information regarding each customer, and track and analyse every interaction with them at every stage of their customer lifetime cycle. This means that you will be able to send customers customised communications based on their interactions with your company. A powerful CRM will identify patterns in the customers most valuable to your business and help you group them, so that you can start refining your communication efforts. Based on how they interact with your brand you could send them the latest news concerning your company, your product, news from your sector, guides, etc. View every communication with your customer as an opportunity to build the relationship.
4) Turn customers into advocates
Advocates are more than just loyal customers, they’re ambassadors. They are such fans of your product / service that they promote it for you via content, reviews or word of mouth. Reviews are one of the most valuable forms of user generated content from brand advocates, especially with regards to acquiring new customers. Studies show that customer reviews are significantly more trusted than product description, and that customers are 63% more likely to purchase a product that has reviews.
So, how can you turn customers into advocates and get them talking about your product/ service? In addition to having a great service/ product and effective and tailored communication with your customers (please above) you also need to consider the following… Make content contributing and sharing as easy as possible on your site and on other networks you’re present on: create relevant hashtags, clear sharing buttons, etc. Be sure to connect the content on all the networks you are present on, this will reinforce the messages and increase participation. Offering prizes, discounts or exclusive offers are great ways of encouraging consumers to write reviews or post and spread content relating to your product and their experience with it.
Social media is a great way for users to share content about your company, however, the information on these sites tends to have a very short lifecycle ie: it disappears from the newsfeed quickly. Therefore, think about how you can incorporate it on to other channels, for example: company blog posts, a dedicated page on your site. You could also consider detailed client testimonials or posting pictures taken by people using the product.
5) Process chargebacks mercilessly
It is a fact of life that some merchants will experience failed direct debit transactions. Despite being a rare occurrence, failed transactions have an effect on revenue, especially within the context of a subscription payment model.
More often than not, chargebacks occur for the simple reason that the customer did not have enough money in their account at the time of payment. So, notify them about the payment failure and retry the payment at the most appropriate time. By understanding and empathising with reasons chargebacks arise, you can make it easier for your customers to turn a failed payment into a working one. It is even possible to automate this process with SlimPay, which lead to one of our clients reducing failed payments by 35%!
It is undeniable that the subscription model offers numerous advantages for both the consumer and merchant, especially in terms of convenience (for the customer) and predictable revenue (for the merchant). Launching or transforming your recurring revenue service based on subscription (or maybe just adding it as an option) could be a wise move given today’s shift in consumer habits. However, bear in mind that this model incorporates a whole new psychology for selling, consumption, support, and measuring your success with consumer. Therefore, make sure you do your research before jumping on the subscription wave.
Want to find out more? Download our whitepaper “How to create a successful subscription business?”!