We’ve seen it before — businesses adding unnecessary friction to the payment process, often without even realizing they’re doing so. This is particularly true when managing recurring subscription payments with customers.
With subscription commerce and recurring billing on the rise, companies everywhere are realizing the immense value of turning one-time purchases into predictable revenue by locking in repeat customers through recurring payment methods.
There are obvious benefits to implementing recurring billing into your business model. To start, unless a customer cancels a subscription, it ensures that funds are regularly flowing into your merchant accounts. Having the opportunity consistently deliver a quality product or service to your customers builds brand loyalty and increases the chance of referral business.
And although there are plenty of benefits to subscription billing, there’s also some points of caution to be aware of when deciding if recurring payments are right for your business. While these next few points may seem obvious to some, plenty of (well-known) businesses have gotten themselves into hot water by not following these customer centric subscription payment guidelines.
Transparency Matters — Above All Else
One of the biggest causes of friction with recurring payments is customers seeing a charge on their credit card statement they don’t remember or recognize. Even when it was a charge the customer had agreed to pay, because statement billing descriptions can sometimes be confusing, they may end up reporting the charge as fraudulent — resulting in expensive, unnecessary chargebacks against your business.
Chargebacks are a $40 billion dollar problem plaguing businesses of all sizes. Don’t let yours be one of them!
To avoid this expensive error usually known as friendly fraud, you’ll want to ensure that your billing procedures keep your customers fully aware of how the charge will be listed on their statement. When customers have a better understanding of how and when they are being billed, particularly on a recurring basis, they’re much more likely to understand and accept the charge as it appears on their statement.
There are plenty of ways that companies utilize recurring payments in their business. Gyms are a good example of companies that commonly use recurring billing to sell membership subscriptions. Gym owners know that most of their customers will likely be using the same gym on an ongoing basis, therefore it benefits both the individual and the business to have the ability to regularly charge an account. The alternative usually involves tracking down payment information, month after month, increasing the chance of customer churn and ultimately decreasing sales revenue.
Regardless of how recurring payment contracts are managed with your customers, transparency in the agreement terms will make or break your ability to develop a sustainable subscription business model. Today’s customers are savvy and have easy access to digital banking methods that allow them to dispute a charge with the click of a button — spurring on that costly chargeback problem once again.
This alone should motivate any business involved with recurring payments to create a frictionless customer experience throughout the entire billing process.
Trust: The Core of a Solid Business-Customer Relationship
When it comes to building great relationships with your customers, transparency and trust are intertwined; you can’t have one without the other. If you aren’t transparent, you risk losing your customers trust. And if your business doesn’t establish trust, it becomes almost impossible to appear transparent!
When a customer enters a relationship with any business, they expect to be met with respect from the company. As it relates to recurring payments, respect boils down to assuring customers that your company will process payments strictly as agreed upon between both parties. If that trust becomes broken, it will no doubt fracture the customer relationship indefinitely.
In any solid business-customer relationship, trust is one of the most important supporting pillars that make any business deal worth engaging in. Your customers must feel they are not only getting a good deal but also buying from a trustworthy source.
Be upfront about the amount your customer will be charged, on what date of the month (or year, if an annual subscription applies), and how the customer can contact your business if they disagree with the charge. Your customers will naturally feel more comfortable with your company and you will inevitably see your revenues grow.
The added bonus of a relationship built on trust? The opportunity to create more sales, increase customer satisfaction and prevent cancellations.
When it comes to keeping your customers from canceling their recurring subscription payments, start by remembering the two “T-factors”: Transparency and Trust. From there, the rest of the pieces will fall into place.