SaaS billing practices
CSPs and MSPsSaaS Providers

Recurring billing and subscription management best practices for SaaS: Things you need to know

4 Mins read

As the technology industry is moving away from the traditional billing model, businesses are more efficiently optimizing their spending using a consumption-based approach that benefits customers and providers alike. 

But to create a great user experience, you must ensure that your Software as a Service (SaaS) billing practices are top-notch. 

In this article, we will look at some of the best SaaS billing practices that every company should be aware of to keep their customers happy and make maximum profits. 

Why is SaaS Billing and Subscription Management Important? 

Mainly, there is one reason why subscription management is important: customer retention. 

Customer retention is usually much cheaper and easier than gaining new customers. It is important to handle subscription management carefully because it equals customer retention, which means more people staying with you over time rather than leaving or switching providers immediately when things get tough. 

In other words, the better your subscription management, the stronger your relationship becomes with your customer.   

Best Practices and Tips for SaaS Billing 

By following some best practices, your team should be able to effectively track and manage SaaS subscriptions:  

Pick the Perfect Price  

Usage-based SaaS billing is an innovative way of providing customers with clear insight into their costs and how these relate to the value they receive from your service. You can make your pricing complex enough to offer something unique but not so complicated that it frustrates your customers. Hence, it’s a good idea to make your pricing structure as simple as possible.  

However, this doesn’t mean that you cannot keep your pricing structure flexible. For example, Amazon Web Services (AWS) and Twilio both use events-based billing to provide flexible, value-based pricing to their customers.  

Twilio’s pricing structures are designed to fit the needs of every type and size of business. They offer monthly recurring charges or pay-as-you-go options based on user events. Similarly, AWS uses an events-based pricing model to offer their customers the ability to pay for what they consume and nothing more. To simplify the process, AWS also provides a pricing calculator to help non-tech consumers understand their prices. This pricing strategy has helped Amazon excel over competitors and gobble up their market share. 

The best way to ensure your pricing model makes sense is by logically tying it with your value metric. This will help customers easily understand what they’ll pay and get.  

Make Signing Up, Holding or Cancelling a Service Easy 

Customers should not face any issues while making changes to their subscriptions. It should be easy to register, modify, continue, or cancel a membership plan at any time. Feeling in control of their subscriptions will give your customers a better experience. 

You might be thinking that easy cancellation sounds suspicious. After all, who doesn’t want to retain customers? It’s not very uncommon for companies to try to hide cancellation options, make them difficult to find, implement waiting periods, etc. 

Take Netflix, for example. You may have experienced that canceling a Netflix subscription is quite a simple process that requires just a few clicks. Don’t you feel more secure that way? An easy cancellation process increases the trust of customers and hence, they are more likely to return. 

Use Customer Data to Refine Portfolio & Increase Revenue 

The fluctuations in demand for your product or service naturally occur over a year, depending on market trends. By using your customers’ usage data to refine a portfolio of product offerings and even pricing models, you can minimize their impact on your monthly finances. This information could help you increase customer loyalty, reduce churn rate, and even upsell products. You can enable your customers to track and manage their consumption levels in real time. This will help them avoid over-using their resources. 

You can use customer data to provide personalized insights into the services that are delivering them the most value. You can offer consumption-based discounts, complimentary products, or training on additional features which will benefit your customers even more. 

Knowing which customers are already satisfied with your services can help your sales and account management teams know where they should spend more time. 

Utilize Customer Data to Anticipate Changes 

By analyzing your customers’ billing data, you can get a better understanding of what they are doing and how their usage changes when it comes to pricing. Use this information to track changes in customer trends so that you can make sure your pricing remains competitive while still providing excellent services. 

Using the right SaaS billing management system can ideally help you predict the product demands, pricing changes impact, and process implementation impact. This data will help you get more understanding of what type of incentive will affect customer behavior to project revenue growth and make plans accordingly. 

Automate to Prevent Revenue Loss 

A SaaS business must deal with many customers, and hence, automation of subscription billing is a must for them. From generating invoices to leveraging technology, businesses need a smart means to address their billing problems.  

Hence, an automated billing and subscription management process can be set up to: 

  • Send invoices for facilitating payment collection 
  • Send reminders about upcoming payments 
  • Inform customers when they’re due 
  • Send communications that are customized for your customers via announcements, emails, notifications, and more. 

RackNap can help 

As your customer base grows, you need to be ready for new challenges and protect your business from silent churn. You need to choose a subscription management software that scales to accommodate increasing complexities in your business.  

RackNap is a subscription management software that simplifies your life by taking care of all the activities involved in subscribers’ lifecycle from signing them up to cancellations. You can manage their free trials, upgrades, and downgrades; experiment with pricing – all with the comfort (and safety) that comes with knowing that everything is taken care of by an automated system. 

Talk to our team of experts about how we can help your organization make the most out of subscription billing. Book a free demo to get started!  

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