When it comes to convenience and cost-effectiveness it’s quite hard to argue against the benefits of a software-as-a-service (SaaS) subscription. This allows you to purchase and access software applications without a large upfront payment. It also means you get regular updates and improvements as and when they are available.
If your business is looking at offering this sort of service there’re several aspects of this model that you need to know about. As well as making sure that you access affordable ACH processing services it will also prove beneficial to have an understanding of the various SaaS models that you can adopt.
A good starting point would be to look at how subscriptions work using the SaaS model.
Understanding the basics
You will find that SaaS models are available with a variety of different subscription tiers to choose from. Each one of these tiers is designed to deliver a specific set of features and capabilities. As you would expect, each level comes in at a different price point. The more features you want, and the amount of capacity you need, are all influential factors when it comes to price.
Payments for subscription services can be collected using an automated system. You can choose between monthly or annual collection, or possibly a bespoke timeframe.
You access these subscriptions using a centralised dashboard. Most aspects of the service can be controlled from this point.
Service and continuity options are easily managed, with software updates being automatically applied.
Your chosen payment processing provider also bears responsibility for compliance and security measures. That means you know that you are achieving industry compliance and have fewer concerns in relation to data handling.
Cancellation and renewal procedures are designed to be as simple and proactive as possible. The default option is usually for automatic renewal, which helps to ensure continuation of service.
Billing models explained
The next area of learning involves having an understanding of the most common types of SaaS billing models.
Flat-rate pricing is probably the most commonly used option. This model involves a single fixed price that covers all features and usage allowances within the specified package. There is also the option of tiered-pricing. This allows you to build in different price points according to the features and usage limits set.
There is also a billing model that covers the number of allowed users accessing the software. This is called per-user pricing. There is also an alternative option which is called usage-based pricing. This encompasses a billing model based on not just the use of the software but also things like bandwidth, and the number of transactions permitted.
There is also the possibility of a so-called Freemium model, which is a basic plan with chargeable upgrades. Alternatively, a pay-as-you-go model offers a good degree of flexibility.
Keep your eye on customer churn rates
It is important to appreciate that SaaS subscriptions still have a certain level of churn. A certain amount of cancellations is to be expected, however, if churn rates are higher than anticipated it is a good idea to look at the underlying reasons for this.
It could be that the customer doesn’t have a good enough understanding of what they are paying for, or it could be that price sensitivity plays a role. There are various viable solutions that you can use to try and keep customer churn rates to acceptable levels.
Even if the process of signup and fee collection is automated it is still a good idea to be proactive with your customer engagement levels. Regular communication via email or in-app messages gives you the opportunity to provide customer support at an early level. This will help dissuade a certain number of customers from canceling their subscription.
Managing billing and revenue
Again, despite the fact that SaaS subscription models are designed to be as straightforward and hassle-free as possible, it is inevitable that there will be issues such as failed payments, invoice queries, and service disputes to contend with.
These problems can make SaaS billing and revenue management slightly more complex. There are viable solutions to these typical issues. If you use some proven solutions it should help to improve the whole billing and revenue management process.
One obvious solution is to deploy an automated process that attempts to take payment again if the original request has failed. You can also use an automated communication system to make customers aware that a payment has failed, prompting remedial action and contact at the earliest possible point in the cycle.
Another no-brainer solution is to make sure that all of your invoices provide the right amount of clarity as to what you are charging for and how the payment total is arrived at.
The use of reliable billing software definitely helps keep billing and revenue problems to a minimum. Improving the accuracy of your billing and focusing on good customer communication will all help keep payment issues at bay, to a certain extent.
Security and data privacy should be a top priority
Security violations can be an absolute nightmare scenario. You not only suffer interrupted service and additional costs, but you can also suffer reputational damage when information is compromised.
With that in mind, it should be considered a top priority to have robust security measures in place. That means implementing strong encryption protocols, excellent access controls, and carrying out frequent security audits.
It also makes sound sense to have a data backup and disaster recovery plan in place. This will help to protect you against damaging data loss, either through a hardware failure, or if you are subjected to a cyber attack.
The benefits of SaaS subscription models are clear to see. You enjoy predictable revenue streams and improved cash flow, plus, you often achieve higher customer lifetime value numbers and reduced customer acquisition costs.
Provided you follow these essential tips, there’s no reason why you can’t grow your business using a proven SaaS business model, without the need for substantial up-front investment in infrastructure or resources.
