Services have replaced goods that were traditionally sold in one-off deals. Subscription became an ideal solution to sell them.
Traditional tools, like enterprise resource planning (ERP), are not always adapted to meet the demands of cloud-based businesses. Using manual procedures is inefficient, time-consuming, and prone to mistakes, which is why many companies are learning to adopt automated solutions.
The question is where to search for a solution that can effectively support the sales team?
Salesforce CPQ has many ways to manage subscriptions, upsell, and renew contracts. This is a clear way for SaaS businesses to grow and make more money.
What is subscription management, and how does it work?
In SaaS businesses, a subscription is a recurring payment model where customers pay for access to software or services at regular intervals. Subscribers benefit from continuous updates, support, and flexibility. Businesses that are based on subscription models have a predictable revenue stream and a long-term relationship with their customers.
Among different types of subscription models, there are some worth mentioning:
- Static pricing: Imagine a project management software that offers a monthly subscription of $20 per user. Customers pay the same fixed amount regularly, regardless of their usage.
- Usage (or consumption) pricing: A cloud storage service charges customers based on the amount of data they store. For instance, $0.10 per gigabyte per month. Customers are billed according to their actual usage.
- Contracted pricing: An email marketing platform offers a 10% discount to customers who commit to an annual plan. For example, their monthly plan costs $50, but an annual contract reduces it to $45 per month.
- Percent of total: A payment processing SaaS charges e-commerce businesses 2.9% of each transaction’s total value plus $0.30 per transaction. As the businesses grow and process more transactions, the SaaS company’s revenue scales proportionally.
- Block (or tier) pricing: A customer relationship management (CRM) platform offers three tiers: Basic, Pro, and Enterprise. The Basic plan costs $10 per month, the Pro plan is $25, and the Enterprise plan is $50. Customers select the plan that matches their needs and can upgrade as their requirements grow.
The choice of subscription model depends on the nature of the business, the target audience, and the value of the product or service. Each model has its advantages and challenges, so businesses can tailor their offerings to customers’ preferences and the changing market.
Challenges with subscription management and how Salesforce solves them
As companies increasingly shift towards offering services through subscriptions, they face a unique set of challenges.
These challenges encompass diverse aspects, including billing accuracy, customer churn, evolving pricing strategies, and ensuring a seamless customer experience.
What are the key challenges and strategies for effective subscription management in the modern business landscape, and how can CPQ Salesforce help?
Over-complicated pricing model
Complex pricing models in SaaS companies can be a major hurdle for both providers and customers. It leads to confusion, longer sales cycles, and even losing potential clients.
Salesforce’s solution: The pricing plans are transparent and tier-based, enabling them to cater to a diverse range of business requirements, encompassing small startups to large enterprises. With various pricing models, customers can choose what works best for them, whether it is per user, per feature, or per usage.
Not efficient communication
Even though your customers expect regular charges, it is important to let them know before processing them. Failing to do so can result in a negative customer experience and potentially lead to customer loss.
Salesforce’s solution: It allows businesses to set up automated alerts and reminders, which will notify customers well in advance of contract renewals or any rate changes. A smooth and transparent billing experience reduces the risk of surprises and enhances customer satisfaction.
Charges are not clear
When dealing with complex usage fees, it is important to give customers a clear breakdown of invoiced charges. Customers who are confused often contact customer support to get clarification, which wastes both time and money that could have been saved by including a detailed list on the invoice.
Salesforce’s solution: With an itemized list of invoiced charges, it is easy for customers to understand the breakdown of charges, including any complex usage fees. This clarity reduces customer inquiries and builds trust and satisfaction, which saves time and money for both businesses and customers.
Poor dunning system
It is a big mistake to not use an automated dunning strategy to retry failed payments. Sometimes, customers churn without noticing because their credit cards might have expired, or their important information might have changed.
Salesforce’s solution: A well-organized dunning procedure is essential. The system automatically retries failed payments, which ensures that customers can easily update their details and avoid unintentional churn. This proactive approach helps SaaS companies maintain their revenue streams and enhance customer retention.
Difficult cancellation process
There are always customers who come and go. It is part of business life. But making the cancellation process more complicated leads to a poor customer experience.
Salesforce’s solution: Using Salesforce, companies can make simple, efficient cancellation processes that collect valuable feedback from customers who leave. The platform supports the implementation of alternative solutions such as downgrades or service pauses, which enhance the chances of retaining customers and turn potential losses into opportunities.
No reporting and analytics
Not having adequate data analysis and reporting can be a serious oversight. In SaaS, these numbers help you make smart choices to grow your business. It is important to keep an eye on how customers use your service, so you can predict what they need and make more money.
Salesforce’s solution: Clear, user-friendly dashboards and insights make it easy to make informed decisions that drive business growth. Salesforce data-driven approach ensures that you can effectively monitor customer behavior and anticipate their requirements, thereby maximizing the revenue potential of your SaaS enterprise.
Overcoming challenges like billing accuracy and customer retention is essential for sustained success. It enhances the efficiency and creativity of subscription management strategies, which are also crucial for organizations in the current economic climate.
Trends in commerce innovations
In the market environment, one thing is sure: the change. It concerns both sides: the customers and the market itself. What are the current trends? According to the survey “State of the Connected Customer, Fifth Edition, 2022 Salesforce” 69% of the customers purchase via subscriptions. Only order tracking (92%), contactless payments (83%), and mobile ordering (82%) are higher in the purchasing process.
These statistics show that there is a growing demand for innovative ways of selling. Customers want digital self-service and remote engagement, which Salesforce can help create. To fulfill these expectations, it is good to have software that supports the needs. Salesforce CPQ is the perfect choice to do that.
