What does SaaS subscription management mean?

Software companies use tools and methods called SaaS subscription management to keep track of their customers and bill them throughout their entire customer lifespan. Simple recurring billing is all about setting up automatic, regular payments. SaaS subscription management, on the other hand, is more complicated and can support more complex pricing models.

Some of the most common features of SaaS subscription control tools are:

• Giving trial times
• Different amounts of subscription
• letting customers change their subscriptions
• Putting monthly and yearly billing processes on autopilot
• Getting used to pricing based on uses and consumption

Adding other tools, like payment gateways, CRM, CPQ, and ERP, to the mix

SaaS subscription management solutions are made to be automated and flexible simultaneously. When a billing cycle starts, they let businesses send out invoices, set up bill runs, and handle regular customer payments without any help from a person. Also, they track how much each customer uses and bills for, give customers self-service websites, and send invoices and payment reminders automatically.

Like words

• Billing for SaaS
• Sales of SaaS

How the SaaS subscription business model works

The way SaaS makes money is a lot more complicated than the way a regular monthly business works. It works similarly: people pay a regular fee to receive subscription products. However, similar services like Netflix or Spotify usually have a set monthly fee, while SaaS companies charge in many different ways.

Pricing for SaaS

SaaS prices need to be flexible because software companies sell to other businesses. Each membership plan has a different number of users and needs.

Two or four flat-rate product tiers are at the heart of every SaaS pricing plan. To meet the needs of bigger businesses, each tier has its own set of features, usage limits, and support choices.

Free trial or freemium Most software companies give free trials so potential customers can try the software before signing up for a subscription. Some companies also give away a free basic version of the software to get more people to use it and encourage them to buy the full version.

Use-based pricing means the total cost of a software subscription is based on how much it is used or how many people use it. This can be especially useful for businesses whose needs change often or that need to add people.

Enterprise pricing: For your most significant users, you’ll probably need a custom pricing plan that fits their needs. This could mean adding features, connecting with other programs or systems, and offering setup and help services.

Microservices: Businesses that offer customizable or modularized software charge extra for specific features and add-ons. DealHub, for instance, has subscription tools like CPQ, DealRoom, and Billing that can be used independently.

Billing and renewals are done automatically.

Auto-renewing subscriptions make things easier for users and keep customers from leaving, which is suitable for providers. The automatic billing process is sped up, and different payment methods are often built in to make transactions easier. One crucial thing about SaaS contract management tools is that they can automate these tasks so that operations run smoothly and quickly.

Pay attention to keeping customers.

Because subscription price models only make money if customers keep paying, SaaS companies put a lot of money into keeping customers.

• Finding customers who are likely to leave and meeting their wants before they do
• Supporting customers on an ongoing basis to make sure they are successful and happy
• Extra services like training or advice are being offered.
• Calling users whose contracts are about to expire to encourage them to stay with the company
• Making a good experience for customers will make them happier and more loyal.

As a SaaS vendor, keeping customers is very important for long-term success. This is why expansion income is the most valuable type of revenue. SaaS companies can get a net zero churn rate with upsells, cross-sells, and upgrades.

What Makes SaaS Money

Most of the money that software companies make comes from their membership products. Still, doing other things that make money can bring in extra cash and make the customer experience better.

Upselling and cross-selling mean giving current customers extras or better services to make them more valuable over time. This helps keep revenue retention above 100%, which investors look for in a healthy SaaS company.

Referral programs—Most SaaS businesses offer affiliate programs. Customers who bring in new customers can earn credits or cash through these programs.

Channel sales: Software as a Service (SaaS) companies sometimes work with marketplaces like AppExchange, agencies, system developers, resellers, and white-label partners to reach more people and get into new markets.

Offering training, implementation, and advisory services is a one-time way for SaaS businesses to make money that they can keep doing.

Some vendors let other SaaS companies use their software to build their goods. This is called a software license. APIs, SDKs, code libraries, and UI features could be part of this.

In-app purchases—Users can buy extra features or usage limits for some SaaS products on the platform. Some SaaS platforms, like Salesforce AppExchange, also have their markets where they sell apps and make money from each sale.

“API fees” mean that you charge someone a fee whenever they want to use certain parts of your software or get information from them.

How to handle SaaS subscription models

Models for Pricing

There are different ways to set prices for SaaS subscription plans, each with pros and cons.

There’s a lot more to setting SaaS prices than meets the eye, but here are the steps you need to take:

• Levels of flat rates. Every subscription service is based on a flat-rate price. Subscribers pay a set fee to use the software and its features, no matter how much or how many people in their company use it. Microservices follow the same pattern.
• Individual pricing. Once a certain number of users are added, the customer will have to pay an extra monthly fee for each user. “$50/month for up to 5 users, plus $5/month for each extra seat,” for example.
• Full pricing is based on usage. Metrics based on usage, like data storage, API calls, and CRM/marketing automation contacts, can change the price levels. In a pay-as-you-go approach, for example, “up to 50 GB of data storage is included; extra storage is charged at $0.10/GB per month.”

The third step is the trickiest because it concerns rates that change instead of flat fees. That’s how SaaS subscription management tools are different from simple billing platforms: they track how much each subscriber uses and instantly change the total bill.

Models for billing

Software companies can charge once a month or once a year.

Monthly payments are what most customers choose because they don’t have to pay as much upfront. Customers start being charged on the day they sign up for the service.

Annual billing is better for the business because they know they’ll get a year’s money and keep the customers. They’ll often take a month or two off the price to get you to sign up.

It also allows usage-based and metered billing, proration (for new subscribers, upgrades, or downgrades), and flexible pricing (for different subscribers). With SaaS billing methods, you can also get:

• Trial times are used to get new people to sign up without them having to pay right away.
• Free plans with few benefits are for people who don’t need the whole thing.
• Coupons and promo codes can help you get new customers or thank old ones.
• Discounts for making long-term agreements.
• Payment plans and different ways to be billed, so the customer can choose how they want to pay (for example, by check or wire transfer).

SaaS subscription management software administrators can set rules for different groups of subscribers, goods, or payment methods to make all of this work. The payment system takes over from there and does the rest of the work automatically.

Problems that SaaS companies face when they try to handle subscription sales and billing

Many parts of the sales and billing process can be automated with SaaS subscription management tools, but companies still have significant problems handling their subscriptions.

Tired of subscriptions? Most businesses use 130 different apps. Customers may feel overwhelmed by the number of subscriptions they need to handle since there are so many SaaS products.

Management of renewal. It’s hard to remember when customers’ subscriptions are due to be renewed, especially if they have more than one product contract.

They are not choosing to churn. This is why 20% to 40% of SaaS customers leave. Credit cards that expire, failed payment efforts, and card declines are all common reasons people have to leave a business without their choice.

On a global level, A lot of SaaS companies have customers worldwide, making tax rules, currency changes, and data privacy rules more difficult to follow. This can be especially hard for small businesses that don’t have a team or program just for this job.

Problems with integration. The information in your CRM, sales automation tools, payment software, and subscription management tools must always be shared. Otherwise, you could end up with the wrong billing and information that doesn’t match up.

Also, it’s important to note that as your SaaS business grows, you’ll need to accept many different payment methods—most people who buy SaaS in the US use credit cards and digital wallets to pay. People in Germany prefer these methods, like PayPal and Amazon Pay, when shopping online.

Advice on how to manage your SaaS subscriptions most effectively

The SaaS approach is one of the most flexible business operations. However, keeping a healthy customer base is one of the most common problems when you’re in charge of subscription sales and bills.

You need people to sign up who are…

they pay you on time every time

I’m pleased with your purchase.

…every time. Otherwise, your business won’t be able to make money. You could lose much money yearly if you don’t follow a few accessible best practices.

1. Set up a way to bill for subscriptions that can be expanded.

When you pay for software every month, it’s much harder to catch people who don’t pay. It’s almost impossible for a person to do because it’s so complicated and there are so many fees.

The whole process is done automatically by subscription management software. So when a customer uses a credit card to pay, the transaction usually goes through the payment system without problems.

In the short term, customers leave without choice, and in the long term, their total value decreases because of it. You need methods for managing subscriptions and following up that take care of this.

Software for managing SaaS subscriptions saves time and money by:

Trying to process failed payments automatically

Automated emails are sent to customers if there’s a problem with their payment.

Self-service options let customers change their payment information.

That way, it can take care of your regular income streams and let you know when payments fail.

2. Find the right amount of difficulty and adaptability.

It can be challenging for SaaS companies to find the right balance between subscription plans and billing choices that work for them and their customers. There is a fine line between having “too much” and “not enough” freedom.

If you want to find a good balance, SaaS subscription management software can help. It lets you offer different subscription plans and does complicated pricing calculations automatically behind the scenes.

Still, remember these things:

You don’t need to give everyone everything.

Your prices must be clear and consistent.

Customers should be able to change their payment plans without contacting your team.

Ultimately, you need to show your offer in a way that makes sense from both a business’s and a customer’s point of view. But it also has to make sense from a value point of view for your buyers.

4. Choose software that works well with all of your other tools.

Contract management software might not work with your finance, sales, marketing, and customer success tools if it doesn’t connect to your DevOps tech stack.

Differences in the data (for example, a customer quits but still gets a bill for next month)

Payment handling problems include chargeback fees and more customers.

Data filing and work that has to be done by hand make mistakes more likely

You have less control over how your membership management system talks to your other tools.

In short, the tools you choose can make or break how your business works.

4. Start with communicating within your own company.

Communication is essential to managing a SaaS contract, but you’ll miss it if you rely too much on software.

Your teams need to work together as a whole. To manage the whole lifecycle of a customer, you also need a structured method.

From the outside, you need to ensure that your subscribers always know what’s happening with their accounts. When their payment or contract renewal date is coming up, it’s a good idea to send them an email automatically.

You should also use data and analytics to look for trends in how your customers act that could affect your sales. For example, you could look for customers who are “at-risk.”

Why SaaS subscription management software is helpful

Without subscription management software, the SaaS approach would not be possible from a technical point of view. With a regular billing tool, you could only charge people once. It would be physically impossible for even a whole receivables team to keep track of all the transactions and use over time to bill them accurately.

When you use well-made SaaS subscription management tools, your company can:

Streamline your work. Subscription software takes over tasks that used to be done by hand, which saves time and resources.

Bring in more money. It helps you make the most of your income streams by lowering the number of customers who leave without their permission and letting you offer different pricing models.

Raise the level of customer happiness. Clients will have a better experience with your business if they can easily handle their subscriptions.

Learn something useful. You can use the analytics and data that subscription management software gives you to improve your business plans.

If you want to sell cloud-based software, you must use tools that work with its system.

Essential Things About SaaS Subscription Management Platforms

Not every piece of software for managing subscriptions is the same. Features and functions can be very different from one platform to the next.

There are, however, some features that every SaaS subscription management tool should not miss:

• Billing is done automatically
• Clear billing and invoices
• Logic for dunning and repeating
• The ability to connect CPQ, CRM, ERP, and finance tools
• Reporting and data for subscriptions
• A self-service portal lets customers handle their payments and subscriptions.
• Support for multiple currencies and languages
• Multiple ways to pay are accepted.
• Automating the receipt of revenue
• Compliance with regulations

You can ensure that your SaaS subscription management software is efficient, effective, and in line with your business goals by carefully considering these features and finding the right mix between complexity and flexibility.