You've heard about it by now--"recurring billing" or subscription services. It's the hottest trend in ecommerce with the promise to make you rich month after month, year after year.

Zuora quotes The Economist with this bit of news: "80% of companies are seeing a change in how their customers want to access and pay for good and services and 50% of these same companies are changing their pricing models as a result." The old model of shipping units and increasing sales is giving way to the new model of gaining subscribers and fighting churn.

Recurring billing is a business technique whereby you charge your customers on a "periodic basis for an ongoing product or service." For a long time, recurring billing was the purview of cell phone providers, cable companies, or SaaS businesses. Now, recurring billing is a technique that has gone mainstream. Whether you're buying underwear, coffee, music, or makeup, you can do so on a recurring payment basis.

The question is--can you create recurring billing for your product or service?

I'm here to tell you it's most likely possible. Here's why.

1. Most people need more than one of something on more than one occasion.

Let me unpack this one for you.

How many times in the next year will you purchase snacks? copy paper? deodorant? lip balm? batteries?

Many of the things that we buy, we do so on a repeated basis. Purchasing these items takes time, effort, remembering, fuel, and general inconvenience.

Wouldn't it be nice if you could automate the process? Losing nothing more than a few dollars on your credit card bill, you could have your snacks at your doorstep, your copy paper on order, your deodorant replenishment on its way, that lip balm in your mailbox, and the batteries in the mail.

That's the simple logic behind recurring billing. If you sell something that an individual will purchase more than once in year's time, you're ready for recurring billing.

2. Upgrade your variety if you can't necessarily improve the quantity.

Some goods are not depletable. Snacks get consumed. Copy paper, used. Deodorant, low. Lip balm, gone.

But how do you "use up" a book? Or a music album? Or a shirt?

That's where the power of variety comes into play. If people aren't using up your product, maybe they're getting tired of it.

Cliche though it may be, "Variety's the very spice of life // That gives it all its flavor," as William Cowper wrote.

People like variety. People pay for variety. If you can't send someone the same object over and over again, perhaps you can send them a variety of similar objects. A fiction lover wants to read more than one New York Times bestseller. A music head will gladly purchase another hip hop album.

3. Make recurring billing standard.

The strategic recurring billing merchants know what they're doing. Instead of providing an option for recurring billing, they are making it standard.

Customers don't do well with choices. Whether through confusion, paralysis, or understandable laziness, choosing between two good things is a hard thing.

That's why you have to help your customer make the choice. And the best choice for both of you is recurring billing.

Today, if you want to buy razors from the Dollar Shave Club, you can't make a one-off purchase. No. Instead, you become a member. But what about if you "don't shave so often?" as the purchase page itself suggests. They have an option, but it's still recurring: "That's cool. You can get blades delivered every other month." Recurring is the only way.

Other businesses, eager as ever about recurring billing, have implemented similar strategies. No testing. Only joining.

4. If your product doesn't recur, then sell service.

What about products that don't recur? If variety, explained above, doesn't work, then what about service?

Take a move from the SaaS playbook. You see, SaaS is both software and service. You can't separate the two. If you sell a product, is there someway that you can add service, and thereby improve the likelihood of recurring billing?

Try it. You sold an HVAC system. Now, sell a protection plan, maintenance plan, warranty plan, or cleaning plan. You sold a roof. Sell a gutter cleaning plan. You sold a set of knives. Sell a sharpening plan. You sold clothing? Sell a dry-clean and replacement plan.

Just because the good is durable doesn't mean you can't have a recurring plan. If you can't sell more stuff, then sell more service.

5. Provide recurring billing for products of the customer's choice.

This option is brilliant because it blends aspects of human psychology with good business sense. Here's the plan in three bullet points:

  • The customer signs up for your product.
  • You send them stuff.
  • The next month, you send them a box of more stuff. They can keep what they want, and send the rest back.

They pay a continuation fee regardless of what they choose (even if they choose nothing), and they pay additional fees for the items they choose to keep.

Does this model really work? Absolutely. Businesses like the Trunk Club are already racking it up with hand-selected styles that help guys look good. Other business are doing a similar brisk business with parallel approaches. It works for household goods, children's toys, toiletries, and clothes.

6. Create a subscription service for a lot of different items.

People like surprises. They like gifts. They like to get stuff--different types of stuff.

So let's deliver some stuff to them, shall we? It's not too late to get in on the subscription box game. Companies like Birchbox put together a box of stuff and send it off every month.

It's the equivalent of strolling through the mall and buying a few odds and ends, except you don't stroll, and you don't actually shop. You just get it in the mail.

What goes in the box each month? It's anyone's guess. In this way, such companies are selling the element of surprise and delight. And it's recurring.

7. Create recurring billing by providing gradual upgrades.

Instead of just giving your customers the same thing over and over again, you can improve the level of quality. Earlier in this article, I mentioned variety, but that's only the start. Can you also improve the quality?

This technique is marvelous for, say, SaaS where you can improve the size, speed, storage, or features of a particular software. But it also works for other goods. How about furniture? In two years, can you replace a faux leather sofa with a leather sofa, based on a certain level of recurring billing? The idea may be far-fetched, but it's not out of reach.

Conclusion

Admittedly, not every business will be able to implement recurring billing. I'm pretty sure, however, that a lot of businesses can. I challenge you to find a way.

You'll be glad you did.

What unique recurring billing strategies have you seen or implemented?

Published on: Mar 12, 2015