Subscription Providers Must Prepare for Usage Models’ CX Impact
The sheer number of companies offering products or services via subscription has exploded in recent years, accelerated in large part by the global pandemic. From boxes with curated products to home meal kits to online streaming services to software licenses, consumers and businesses alike have embraced the concept of paying a monthly fee for the convenience of having a product delivered to their door or the ability to consume a service without limitation. For enterprises, the subscription phenomenon has created a host of new and lucrative recurring revenue opportunities.
But as the global economic outlook has softened and the volume of subscription providers has exploded, the winds are shifting. Recent studies have found that both consumer and business subscribers are tiring of the number of subscriptions they are carrying and are looking to eliminate or, at the very least, reduce the amount of money they spend each month on subscriptions. One survey found that 72 percent of U.S. subscription consumers believe there are too many services, while a Kearney Consumer Institute report revealed that 40 percent of consumers are spending more than they realize and want to reduce subscription spending to below $50 a month.
Many studies, mainly in the consumer domain, are drawing similar conclusions. In the business world, it is well documented that enterprises want more flexibility in their subscription arrangements, with the ability to easily scale usage up and down as business conditions change and, ultimately, pay only for what they need.
Subscription providers, faced with the daunting prospect of lost revenue from churn, are pursuing creative and innovative ways to offset the swell of frustration among those who not only feel they are paying too much for too many services but also believe they are no longer getting commensurate value for money. One approach to warding off churning subscribers is to move from only offering simple, fixed monthly fee subscriptions to also offer usage- and consumption-based models, which provide greater flexibility, more billing and payment options, and the incremental value subscribers crave.
While transitioning to consumption subscription models means more accommodating billing arrangements that can stave off mass cancellations, providers need to understand that moving from simple subscriptions to usage-based models will impact customer experience in significant ways and consider the implications for customer service and support.
In a simple subscription scenario, the monthly fee is the same every month. With the invoice total likely to be the same or very similar from one month to the next, the subscriber is far less likely to query their invoice or contact customer care about their billing concerns with any level of frequency. In fact, the chances are quite high that the subscriber does not even look at the bill. Money is automatically withdrawn at the designated interval of time via the payment option of choice.
This paradigm changes dramatically in a consumption-based model.
Consumption-based billing introduces variability into the billing process, and since invoice charges will be based on how much of the product or service is used, the subscriber will want and expect to track their usage in real time and be alerted should predefined thresholds be approached or exceeded. Even with the right alerts and controls in place, there are bound to be more instances of bill confusion or shock, especially when the user receives an invoice for an amount higher than anticipated. As this happens, incoming queries to customer care will increase. Lack of preparation for these changes can drain an enterprise of resources. Subscribers, perhaps already frustrated by the issue related to their bill, will become even more dissatisfied with the service and potentially take their business, and recurring revenue relationship, elsewhere.
Enterprises must therefore elevate customer care capabilities and adopt bill shock prevention strategies as they begin to offer more complex usage-based models and billing engagements. This includes providing users with a direct line of sight into usage so they can understand their liability at any given point in time. Developing and offering a robust self-care capability will empower users to manage their subscriptions, see where their actual bill stands at any moment in time, and create alerts and automated notifications as to when limits are being approached or when atypical activity, like traveling abroad, could result in unexpected fees being incurred.
Even as subscribers continue to tighten their belts and seek to reduce spending, the concept of subscriptions is assuredly here to stay. Consumption-based subscriptions can protect valuable relationships and deepen customer loyalty and retention among discerning consumers and business subscribers; in fact, they often unlock access to previously unreachable market segments. But any company undertaking this move must adopt strategies to manage what will almost certainly become a more engaged and active customer base.
Brendan O’Brien is cofounder and chief innovation officer of Aria Systems, the leader in helping enterprises grow subscription and usage-based revenue.