Subscription management refers to all operations in the lifecycle of subscribed customers, such as managing free trials (trial offer, trial period, etc.), refunds, and mid-cycle subscription changes.
While recurring billing is automated, subscription management involves billing actions that may not always be scheduled.
A significant portion of digital and physical services we use today are subscription-based.
Hellofresh (meal kits) or LePetitBallon (wine) for the home. Slack, Hubspot, or Pipedrive for work. Freeletics or Asana Rebel for a workout. Spotify or Apple Music for working to music. Gmail for work emails. Netflix, Disney+, or Amazon Prime Videos for relaxation.
SaaS companies, media outlets, educational portals, e-commerce websites, and many other businesses have recognized the value of transforming one-time customers into recurring subscribers. Adopting this sales model has brought significant changes in how they generate revenue, often providing more stability and confidence in their projections.
And when recurring revenue drives growth, customer retention becomes one of the most closely monitored metrics for a company, making subscription management increasingly important. But what exactly is subscription management?
Distinguishing Subscription Management from Recurring Billing and Payments
Every company with a subscription sales model tracks customers, processes payments and cancellations, records purchase history, sends invoices at the right time, triggers payment failures, and much more. However, it doesn’t necessarily require a single solution to handle all of these aspects.
Here’s what subscription management is NOT:
- Recurring Billing: A “bill” is generally defined as a printed or written statement of the amount due for goods or services. Recurring billing is an automated process involving the customer, the merchant, and a means of keeping track of a periodic transaction between the two. In its simplest form, it supports invoicing factors such as proration and regional taxes.
- Recurring Payments Processing: This involves storing sensitive payment data and facilitating secure funds transfer between the customer and the merchant. Some popular payment processors are Stripe, Adyen, Braintree, GoCardless, and Slimpay.
A subscription management solution complements a payment processor to handle recurring billing and allows teams to take actions that cannot be automated.
In other words, it enables you to handle a wide range of customer-related actions that come into play when payments are recurring. But why do businesses need it? The fact is, when customers return to you week after week, month after month, your relationship evolves from a simple transaction to a long and engaged conversation.
Why Subscription Management Matters
Let’s explore why subscription management is vital using three scenarios from a typical customer lifecycle:
- A customer signs up. Did they sign up for a trial period? If they’re undecided about continuing to use your product after the trial, are your customer service representatives empowered to extend the trial? In the case of subscriptions, it’s as important to encourage people to stay after they sign up as it is to get them to sign up in the first place.
- A customer uses your product or services. Customers require a whole range of billing-related services when actively using your product. They may need to upgrade or downgrade. If this happens in the middle of a recurring billing cycle, is it reflected in your record-keeping system? (Which is a fancy way of saying, “Are these data updates happening wherever they need to in your digital ledger?”) Can you engage in a conversation at this stage, to calculate credits, track ad hoc charges, or offer discounts on a plan you’d like them to adopt instead? Subscription management eliminates the manual work required to keep accurate records of the many billing conversations you have with your customers.
- A customer churns. Losing a paying customer when you have a recurring billing pricing model is a loss equivalent to the lifetime value (LTV) of that account, not just a single sale. The impact of churn is much greater, hence the importance of understanding what requests were made, how they were handled, and whether recurring billing was complemented by subscription management.
Recurring billing and subscription management are inherently intertwined, with one providing automation and intelligence, and the other offering flexibility and more control.
So, when subscriptions are poorly managed, customers lose trust in the company and no longer wish to engage with it. If you can prove that payments are secure, responsive, and transparent from the company’s side, customers forget about billing and focus on the value and experience you provide.
The foundation of success for any recurring business lies in its ability to build strong, positive relationships with its customers. With a well-designed subscription management system, each sign-up can be the start of something beautiful rather than an operational headache.