Nearly all departments – marketing, sales, customer service, accounting and finance, etc. – rely on data to reach target markets, turn prospects into customers, deliver support, create timely and accurate invoices, and much more. That’s a lot of data that is needed and when the data is outdated, inaccurate, or inconsistent between systems, errors occur. Not just small errors, ones that could affect customer satisfaction and profitability. While all organizations collect and leverage data, subscription-based businesses are in a unique position. Keeping customers is an imperative element of the subscription business model and when customers churn the business loses recurring payments. While there are a lot of stats regarding the benefits of retaining customers, here’s a few that provide eye-opening insights.
- Acquiring a new customer can cost 5x more than retaining an existing customer.
- Increasing customer retention by 5% can increase profits from 25% to 95%.
- The success rate of selling to a current customer is 60% – 70%, while the success rate of selling to a new customer is just 5% – 20%.
- Loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering.
- S. companies lose an incredible $136.8 billion per year due to avoidable customer churn.
While critical, customer retention is just one aspect of data usage. Reliable customer data plays a pivotal role across the entire subscription business model.
Customer Data: The Cornerstone of a Subscription Business Model
In today’s data-driven world, the volume of data is exploding, making its accuracy that much more critical. How can you be sure the data your subscription business model relies on is accurate? To start, ensure data quality by creating a centralized database, capture and store all data results. You’ll need to assign permissions to change data, keep data sources in sync, standardize and simplify the data entry process. It’s also important to merge duplicate data, and regularly audit the data. While the previous provides some high-level processes, you need to know what data is important for your organization, what’s missing, how to capture it, and how to ensure quality data regardless of its origins.
Start collecting all the needed data like customer information (contact information, payment methods, products, services, subscription features), financial data (revenue generated), product catalog content (products, services, bundled features, etc.), price (cost of features purchased, etc.)… and much more. Then you can determine how best to use the information collected. With consistent and reliable data, you’re able to do many things.
Measure performance
As a subscription business model organization you have a different set of metrics you measure your business’ performance against, such as:
- Monthly recurring revenue (MRR) – This figure helps you determine where you can adjust subscription rates and provides confidence when predicting future revenue.
- Annual recurring revenue (ARR) – Know year-over-year trends and use the figure to set growth goals.
- Churn rate – Whether voluntary or involuntary, this figure provides the dollar value lost due to churn and the percentage of customers that terminated their subscriptions during a given billing cycle.
- Renewal rate – Take the number of subscription renewals in a given period and divide it by the total number of subscriptions due for that same period. Then you’ll have the figure needed to determine whether your renewal rate will meet growth projections.
- Average revenue per account (ARPA) – Some customers will have multiple accounts, making revenue generated per customer inaccurate. Instead, divide your MRR by the number of accounts to obtain ARPA.
- Customer lifetime value (CLV) – This key metric is determined by dividing the average MRR per customer by the monthly churn rate.
Improve decision making
With high-quality data, you’ll have the information needed to quickly make informed business decisions – for better business outcomes.
Increase productivity
How much time does your staff spend correcting errors? Accurate data all but eliminates the need for your staff to spend time finding and fixing errors.
Decrease costs
Data errors and poor data quality not only cost money but could negatively reflect on your brand’s credibility. A single data error could have a domino effect that not only reduces your staff’s productivity while they resolve the issue, but could negatively impact your revenue and profitability.
Improve compliance
Strict regulations make it critical for precise reporting. Accurate data helps ensure your enterprise’s revenue recognition aligns with ASC 606 and IFRS 15. In addition, quality data helps you maintain internal controls over financial reporting and the privacy of customer data with SOC 1 & 2 compliance.
Enhance the customer experience
Nearly all departments within your organization impact the customer experience. High-quality data ensures all departments have access to the most recent customer data. This allows them to deliver seamless and consistent experiences across the entire customer journey.
It’s clear that data-informed insights enable you to determine which products and services are driving the most revenue. You can also determine customer behavior patterns, optimize pricing, forecast and mitigate churn and predict financial trends. Ultimately, you’ll understand the financial health of your subscription business model organization much more!
Subscription Billing Software is Essential to the Subscription Business Model
Having quality data and gaining the confidence in the data accumulated isn’t an overnight endeavor. Today, many subscription-based companies have data that is locked in silos across the company, keeping them from gaining the benefits provided.
A billing system, built for the complexities of today’s subscription management processes, helps provide a single source of data truth. It’s important to remember that while your subscription billing software tracks customers and generates invoices, it can do so much more. Robust subscription management systems also include reporting and business intelligence tools so that you can easily extract meaningful information.
With the granular data provided by subscription billing software solutions, you can assess the health of your organization from multiple perspectives such as products/services/subscription plans, sales, marketing, finance, customer retention, etc. There are three tools that the subscription management solution should provide.
- Reports: Extensive reporting capabilities provide access to a wide-range of ready-to-use reports. Using data that can be easily manipulated, you’ll also gain the ability to create customized reports.
- Dashboards: When you need up-to-the-minute insights, dashboards make it easy to create powerful role-based views, charts, and graphs.
- Analytics: With advanced analytics, you’ll be able to define, analyze, and evaluate the metrics that are important to your subscription business. Things like customer churn, month-to-month variances, capacity, revenue growth, etc. Additionally, some subscription software solutions provide the ability to create custom filters that will enable analytics on any variable.
Turn Data into Dollars
Managing your organization’s subscription business model can be a struggle without having clean and reliable data. Unfortunately, for many businesses, integration between front- and back-office systems is limited (or non-existent).
Getting the most from the valuable data you’re capturing requires integration between all key systems. Those like service delivery, financial, CRM, ERP, BPM, RPA, general ledger, tax solutions, etc. This ensures a seamless flow across all customer touch points – onboarding, billing, revenue recognition, subscription renewal, and everything in between.
The value of data shouldn’t be underestimated. By relying on accurate and reliable data, you’ll increase customer retention, make appropriate pricing adjustments, improve productivity, decrease errors, and put your company on the road to long-term profitability.
This is why we developed a solution with the requirements of subscription-based businesses in mind. BillingPlatform‘s flexible and scalable platform provides the insights needed to monetize any revenue opportunity and deliver experiences that create long-term subscribers. With us as your partner, you’ll have the tools needed to turn your customer data into dollars. See for yourself with a guided tour of our solution.
