Why Recurrent Revenue is Best and Recurrent Billing Not

Leads Explorer April 26, 2012 Comments Off

Recurring Revenue

The best business models are those that allow for recurrent revenue. This can be subscriptions, consumables, utilities or insurances.
The benefit for the business owner is the predictable, stable and can be counted on in the future with a high degree of certainty. The same applies for the salesman as he will get a steady or fixed commission income from these recurring revenues.
Moreover with each customer won, the business revenue increases for the long term.

Recurrent Billing

Although the automatic recurrent billing is the best for driving your revenue as the customer gets billed anyhow. And he will need to take action in order not to get billed anymore, this method is not preferred by the customers. Customers hate the idea to sign-up for a service or a deal which they need to cancel in advance – within the time defined in the contract – in order not to get billed again. It is just too much hassle and not customer friendly as they feel tied up.

Recurrent Billing Issues

There are other issues with recurrent billing: for example if the price is related or a function of consumption or use which can easily change over time: like consumption level, time used, number of visitors, number of calls.
Any price change will that are billed without notice, will generate questions by telephone, emails and letters which increase the cost of operations significantly as you are dealing with unhappy or even agitated customers. Not exactly the best way to keep your customers.

Price Buckets

In order to cope with small fluctuations in the use of the service, buckets are the best means for keeping the price steady as customers don’t like price changes. Each bucket having an lower and upper limit for the use of the service, consumables, utilities.
Still if the consumption or use of capacity increases beyond the limits of the current bucket, you need to change the price which is a hassle using fully automated recurrent billing systems. Make sure you don’t bill twice or bill the wrong amount.
Moreover you need to inform the customer before invoicing and billing him more as you need to respect your customer. So when will you change the automatic billing amount ? How much time after informing him ? How will he respond to the price change ? What to do if he doesn’t accept it as his contract is not cancelled ?

Recurrent Revenue vs Recurrent Billing

Recurrent revenue is the best business model ever.
Recurrent billing is not really liked by the customers:
- They don’t like to be tied up with your billing
- Consumption fluctuation requires to adjusting prices requiring to inform the customer
Hence in our view it is better to inform the customer before the end of the subscription about the change in pricing (higher or lower) and at the same time inviting him to make a payment for the next period or quantity.
In this way the customer can easily end the contract by simply not paying and he feels free instead of being tied to you as a provider. of course you should ask why he is no longer interested in your services.

LEADS Explorer will inform customers at the end of the subscription about the price for next subscription and at the same time invite them to make a payment. The customer is free to choose to continue or not.

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