Media and publishing companies struggle to avoid revenue leakage in their preferred revenue model—subscriptions. Although this model helps to sell a product or service for an up-front or recurring charge on a continuing basis, subscription cancellation is a constant challenge. Typically, companies lose a substantial percentage of their subscription revenue for reasons ranging from poor customer experiences to ineffective renewals processes, outdated customer data, an incorrect product bundling and pricing mix, improper customer segmentation, digital shift, format incompatibility, usage, and budget.
Approximately 70% of subscription revenue comes from renewals. A significant challenge in publishing businesses is auto-renewals. This not only leads to a poor customer experience and likely nonpayment but also adds to the cost and time of administration because of credits and re-bills.
Although the digital shift, budget, usage, and format incompatibility issues primarily remain out of the publisher's area of influence, all the other factors leading to subscription cancellation can be significantly mitigated by focusing on efficient process design and getting the model right.
Key factors for creating an effective subscription management model include the following:
Consolidated view of the customer
Customer data is typically spread across CRM, ERP, and a host of other legacy applications. It is important to create a single view for the customer across the company's lines of business and sales channels, and then integrate it with derived attributes from website click stream and social interactions, etc.
Customer lifecycle management
To improve loyalty and repurchase rates, companies must manage the customer lifecycle to ensure that changes and shifts are tracked continuously.
Integration with product data
Customer data should be integrated with product data. This helps the company understand what products are purchased by which customers. It also provides opportunities to avoid cancellations and to cross-sell/up-sell similar products to appropriate customers.
Analytics and insights
In addition to using KPIs and metrics to measure success, publishing organizations should centrally maintain, measure, and track key analytical insights such as customer lifetime value, customer profitability, product profitability, channel insights, etc.
Seamless integration of systems
All data systems should be seamlessly integrated in a process where one triggers another and ensures that all elements are aligned. This requires very strong process, order management, and contract systems, with clearly defined levels of approval and a focus on the cultural sales dynamics. An intelligent technological solution helps fix issues related to disparate systems.
Effective billing and AR management
An analysis of disputes logged by customers in the publishing industry clearly points towards invoicing issues as the major contributor toward aging receivables. Though non-payment is an obvious outcome, a more damaging factor is customer dissatisfaction resulting from incorrect billing, which adversely affects the renewal process.
An efficient invoicing process design that includes a valid PO or PO alternative and accurate cash application is essential to preventing a dispute loop. Billing and AR processes should be designed with the end customer in mind and in such a way as to ensure payment.
In an ideal world, auto-renewal should not happen, as it often leads to a poor customer experience, missed upsell opportunities, and a higher likelihood that the customer will not pay. However, a strong renewal management process using customer segmentation by risk type, usage, product complexities, or established products vs. new ones, combined with analytics, would help renew the right customers on the right products.
Initiating contact with customers before renewal is important to avoid administrative cost and time spent on credits or re-bills. Cancellation terms for print and online products should be clearly laid out. Companies should also align sales commissions with the collections metrics for these customers.
Ensuring that O2C processes are aligned to customer expectations and needs goes a long way toward reducing cancellation rates and keeping subscription revenue flowing.