Potential Revenue Leakage Issues that can Occur Even Before the Sale

Kiran Mohan, Marketing Assurance

Subscription models offer favorable opportunities for both the providers and customers alike, yet it can be a nightmare owing to its inherent complexity. The nature of subscription businesses is that solutions are often customized to suit the needs of diverse customers, and this leads to complexity in billing cycles, upgrades, downgrades, payment processing and so on.

The growing customer base doesn’t make it any simpler either. In fact, both the growing customer base and increasing revenue induce a false sense of security; “the numbers look good on paper, and a little revenue leakage won’t cause a great deal of pain” mindset is extremely risky, because revenue leakage in a subscription business can grow exponentially with little warning.

While this leakage occurs after the sale, potential revenues can leak even before the sale goes through. Let’s take a look at three areas prone to revenue leakage and how subscription businesses can overcome these issues.

Complex checkout process

Long and complicated checkout processes dissuade customers from completing the purchase. Customer drop-rates during checkout equates to lost revenue, so a simplified checkout process with minimal steps can make for a faster conversion. As an example, one of the biggest hindrances in the checkout process is a huge form to capture customer information. An alternative to this is introducing progressive forms that capture detailed customer information, as these forms can be filled even after the checkout process. The key here is to draw out a clear and concise joining experience, wherein the sign-up is simple and quick with minimal steps, to reduce the number of people who drop out due to the sign-up burden.

Insufficient payment methods

In addition to the long sign-up forms, another time when large customer loss occurs is during the payment process. There are two key complexities in the payment process – one is providing enough choice of payment types (in terms of credit cards, debit cards or PayPal), and the other is providing enough choice of payment frequencies (in terms of lifetime, monthly etc). Lack of flexible options is a huge turn-off for potential new consumers. And, as the payments towards a subscription business are neither one-time nor uniform, customers are likely to demand high flexibility in payment options. A recurring billing platform can bill the consumers accurately and offer the flexibility in making payments annually, monthly, fortnightly or semi-annually. By optimizing and creating resources for different payment methods, you can handle the issue of leaking revenue through failed payments, thus reducing the number of people who quit their subscriptions when too few payment options are available to chose from.

Everything to everyone

Too many options, be it in the subscription packages or pricing options, can be a huge turn-off as well, as customers do not always want to make complex decisions. For example, imagine Netflix creating multiple packages and pricing models based on language, genre, region, recency of the release, web series and so on—all of these overly complex packages would give anyone a headache! Giving customers the freedom and flexibility to select does not mean that the organizations should offer every option under the sun; adding too many features in the product, pricing options and business model leads to bloating and ambiguity. Plus, customers lose track of why they should upgrade and can even lead them to cancel the subscription altogether. The key here is to constantly track the ROI on the flexibility being offered. Usually offering just two to three options helps the consumers to understand the differences and make faster buying decisions.

At some point, subscription business stops being a science and standard rules may not work. The same is true for revenue leakage. However, the points we’ve discussed above are common for most subscription businesses and a source of potential revenue leakage.

Do let us know if you come across a significant source of potential revenue leakage in your subscription journey.