The sale of services on a subscription-based pricing model is becoming increasingly common among SaaS providers. This is due to its ability to create consistent revenue streams for businesses while giving customers more flexibility in the level of service received. Charging customers on a recurring rather than one-off basis has become “the new black in the digital economy.” Using subscription pricing models, SaaS platforms are able to increase customer lifetime value whilst simultaneously providing greater flexibility to users and reducing churn. Additionally, accepting cryptocurrency payments for SaaS subscriptions allows businesses to increase payment options for customers, enjoy lower transaction fees, and expand their customer base.
How Subscription Pricing Can Improve Revenue Streams for SaaS Platforms
Adopting a subscription-based pricing model secures more consistent revenue streams for businesses, while providing a high level of flexibility to customers in the ways products are delivered and how they can be paid for. Offering services via the standard ‘pay once’ model requires that SaaS businesses maintain a constant customer conversion rate to keep revenue steady. Consequently, periods of lower sales performance with fewer conversions can have a substantial impact on business operations. Implementing a subscription pricing model helps to mitigate the effects of quieter sales periods by providing predictable and consistent revenue streams, with payments scheduled on a regular basis. This helps to ensure normal business operations can continue unhindered.
Fusebill notes one particular benefit as an increased return on customer acquisition costs when using subscription-based pricing. When providing products and services to customers in exchange for a one-off payment, the rate of return attached to the costs of acquiring customers remains constant across the lifetime of each customer’s interactions with a business. However, when selling services on a subscription basis, customer lifetime value can continue to grow as long as subscriptions are maintained, thereby providing potential for a higher ROI.
Cost-Savings and Enhanced Customer Retention
Offering services on a subscription basis also increases the frequency of interaction with customers, allowing a firmer relationship to be created between providers and end-users. Through continuous contact and service provision, value is clearly demonstrated and trust is established with customers. Subsequently, subscription fees eventually become a routine and expected expense for customers. Once a subscription becomes normalized to customers as part of their month-to-month budgeting, upselling additional and supplementary service features becomes easier. After customers have subscribed to and used the service, demonstrating the additional value that could be added by opting into a higher-tiered service package becomes simpler. Additionally, making use of a tiered pricing system to this effect not only simplifies upselling, but allows customers to customize their service package according to their individual needs.
From a cost-saving perspective, setting up services to be charged on a weekly or monthly basis also works to reduce time-consuming manual payment reconciliation processes. Funds are automatically collected from customers at predetermined intervals, eliminating the need to reach out to customers for payment and reducing missed payments substantially. Vopay estimates that collecting fees on a recurring basis reduces time spent chasing unpaid invoices by 40% and reduces outstanding day sales by 44%.
A common concern for SaaS platforms is getting products to market as quickly and efficiently as possible. Using an established payment services provider (PSP) and their recurring billing solutions is likely to be more cost and time-efficient than building a billing system from the ground up, while also integrating the PSP’s best practices into the product. PSPs will also have a catalog of metrics and reporting tools that report on sign-ups, outstanding bills, and cancellations, making revenue management simpler and more precise. Similarly, third-party payment systems will have been built in accordance with payment card industry (PCI) regulatory requirements, ensuring that all payment processing is fully compliant.
Empowering Customers with Payment Flexibility
As well as providing enhanced flexibility and revenue protection for SaaS providers, subscription pricing also presents a number of benefits for customers. Subscription-based services are often accompanied by trial periods to allow customers to become acquainted with the service and get a sense of the value it provides. This promotes the establishment of a positive relationship between user and provider early on in the lifecycle and builds a solid trust foundation. In an increasingly competitive digital market, customers have come to expect this kind of flexibility from service providers – Upflow notes that even asking customers for credit card details upfront can reduce sign-ups by up to 10%. Customers appreciate being able to try out the products they are interested in without having to make a financial commitment upfront. Offering trial periods on a one-time payment model is less straightforward. Subscription models, however, allow customers temporary use of the full package which can be delivered instantly. While offering free trial periods lengthens the customer lifecycle, thereby increasing the time needed to balance customer acquisition costs, this effect is negated by the potential for increased customer retention that accompanies subscription price models.
By implementing a subscription-based pricing system, SaaS providers can offer customers a variety of pricing and service options to place greater control in the hands of end-users. Customers can be given the option to pay in increments of varying sizes, or at varying intervals. Similarly, subscriptions make it simpler for customers to upgrade or downgrade the level of service they receive. Offering price and service level personalization is an indicator that a business is flexible, projecting the “customer first image that customers expect.”
Accepting Cryptocurrency Payments for SaaS Subscriptions
Integrating cryptocurrency payments into your recurring payment network yields a number of additional benefits to merchants and customers. Firstly, customers can be given greater flexibility in how they pay for their subscriptions. The number of consumers who own crypto is increasing rapidly, so accepting crypto payments for SaaS subscriptions allows this demographic to make purchases using their preferred cryptocurrency. Supporting cryptocurrency payments in subscriptions is also likely to draw in younger and more tech-forward demographics, thereby helping to expand a business’s customer base. Cryptocurrency processing fees for merchants can be as low as 1% per transaction, representing a significant cost-saving when compared to traditional payment methods. This cost-saving is particularly pertinent for high-risk industries, whose businesses are often encumbered with substantial transaction processing fees.
Subscription pricing can provide a multitude of benefits to SaaS merchants and customers alike. Customer churn is reduced, and retention increased, when providers can offer more flexible pricing and payment packages. In addition, businesses are able to maintain consistent revenue streams and increase lifetime customer value by charging customers in smaller increments on an ongoing basis. Services become more accessible to customers, who may otherwise have been put off by a larger one-time access fee.
RocketFuel for Subscription Management
RocketFuel’s provides simple and effective payment solutions to SaaS platforms wanting to improve the accessibility of their services with cryptocurrency payments. Our simple yet powerful system allows customers to pay for subscriptions in 120+ cryptocurrencies, while allowing merchants to be paid in their preferred currency. Get in touch with RocketFuel today to find out how your SaaS business can benefit from integrating cryptocurrency payments into your recurring billing system.