Recurring payments, also popularly known as Recurring Billing or Subscription Payment, is one of the most functional and practical phenomena in digital marketing. Most of the e-businesses have been using this strategy to SAVE TIME, BUILD LOYALTY and AMELIORATE CASH FLOWS.
Before we dive into what recurring payment is and how it can be beneficial for your business, let me ask you some questions:
- Did you know that acquiring a new customer is 5 to 25 times more expensive than retaining an existing one?
- Did you know that increasing customer retention rates by 5% consequently increases profits by 25% to 95%?
- Did you also know that existing customers spend 67% more than the newly acquired customers?
You might have answered either yes or no but now that you know these facts, you must be wondering what YOU can do to reap such benefits. If you are, then keep on reading!
Well, in consideration of statistics like these, the bottom line is that businesses can profit more from their existing customers. They just need to dig a little deeper and be more creative on their strategies to retain the customers. One way to do so is to get Recurring Payments.
Breaking Down Recurring Payment
Recurring payment is an ongoing process where you charge your customer a certain amount of money for a specified good or service and that amount is automatically withdrawn from the customer's' card or account on the basis of a previously agreed schedule.
So here's how it works, imagine that you are a digital publication company and like any other publication, subscriptions are one of the most significant economic models for you too. Now using a recurring payment software would mean that your readers' subscriptions and your revenue are managed automatically by storing payment data and processing charges on a recurring basis without you having to go through the hassles of billing manually that too over and over again.
Similarly, businesses that revolve around products and services that the customers purchase repeatedly and regularly are the right fit for recurring payments. Some of examples of such payments are gym membership fees, electricity bills, telecommunication, internet bills, etc.
Now you might wonder how is recurring payment different from payment gateways since both deal with collecting payments from the customers. Well, while payment gateways focus on receiving the payments, recurring payments focus on your subscriptions and on managing your key accounts.
RECURRING PAYMENTS GO AN EXTRA MILE IN 3 WAYS
IT HELPS YOU FORECAST SALES AND INVENTORY
Uncertainty is the mother of all risks. But with a recurring payment software, it's like having a magical crystal ball. It lets you predict how much inventory you will need in the coming months and also you can estimate on how much to expect from your sales.
However, a small uncertainty of the customer base size still exists. It can either grow or shrink but nonetheless, it can still be factored into the equation giving you an average estimate of sales and inventory.
IT HELPS MAKE YOUR CUSTOMERS HAPPY AND ULTIMATELY YOU TOO
Recurring payments not just saves your customers the trouble of reminding themselves to reorder and repay each month but also it helps develop a feeling of attachment and loyalty to your product and brand which in business also means a steady stream of revenue.
IT HELPS SAVE YOUR TIME
Finally, with a recurring billing software, you no longer need to go through the hassles of manually sending the invoices to your customers month after month.
Practically, Recurring Payments can be Differentiated into Three Categories:
Standing Order: The term “standing order” suggests that the purchase order is of a fixed amount of a specified product or service at fixed intervals of time. And consequently a fixed payment is withdrawn from the customer's' card or account in fixed time periods while using a standing order recurring payment plan. The best example would be that of a gym membership fee where a fixed amount is to be made every month.
Direct Debit: On the other hand, in case of payments like that of electricity bills, the amount to be paid might vary month to month as per the consumption. For such payments, there are direct debits where varying amounts of money is withdrawn from the customer's' bank account at varying time intervals.
Using E-Wallets: Subscription payments can also be made using e-wallets. For instance, let's assume that a customer who needs to travel frequently has maintained a Digital Wallet account and has agreed upon a flight subscription payment with one of the airline partners. Here, the customer's account will be charged rather than his / her bank account on a recurring basis as per the prearranged schedule. Using e-wallets for subscription payment is actually the most effective and secure way because unlike credit card payments, e-wallets don't expose the user's' personal information. All they need to enter is their account details and password. Hence, no sensitive data is put at risk. Simultaneously, e-wallets also ensure that you work with legitimate customers only.
So at the end of it, knowing that recurring payment is a powerful strategy, you also need to know that in a country like ours the term “online payment” still has a certain ring to it that makes some customers run towards the hill. And with recurring billing, they might even start thinking about credit card scams or some sort of never-ending debt spiral.
But as a smart businessperson, you must know that the only way through such fears is with knowledge. Hence by educating your customers about how convenient recurring payments are, how it helps reduce the risk of identity theft, how easy and safe it is and also by providing them testimonials, you will not just be increasing your sales revenue but also be creating a trust bond with your customers.