In the competitive subscription landscape, how easy or difficult it is to pay can affect whether or not your subscribers convert and continue to pay long after the first payment is processed. In this CXO Insights video, Shane Oren, Recurly’s SVP of Sales explains the advantages of creating a frictionless payment experience for your subscribers and the many benefits to your subscription business. Check out the transcript of the video below.
At the end of the day, if you remove the friction for your consumers, you're going to drive more revenue, have a higher lifetime value for that customer, and reduce your transaction fees by being smarter with the way you're selling things.
Ultimately, if you adopt these strategies and you're flexible, and you're thinking about your customers first and you offer the payment method they want, you're going to have more money in your cash register.
Subscribers really care about friction. How hard is it for them to process a payment on your website? Do they have to sign up for an account, then re-sign in, then put in their credit card information, then validate that credit card—only to have that payment fail because the gateway you're using didn't process that transaction in time? Is that consumer going to come back? You have to think about all of these things.
For the consumer, if your card fails on a website, the first thing you're going to do is call your bank, make sure your card hasn't been compromised because it got declined, and make sure you still have money in there. So now as a business, I've set that consumer in full panic mode. What if they entered that card a second time, but your gateway had a timeout error, and the consumer went to your competitor because you couldn't process that payment in time? That's what I mean by friction.
You've got to make it easy for customers to spend money with you the way they want to interact with your brand. Are they a millennial without a credit card? The stats show that millennials have, on average, zero credit cards because they're using alternative payment methods. If you don't offer those, you're already losing a target market. Maybe they're Gen X or Gen Y and they're comfortable paying with that credit card, or maybe they're a little bit older and they only want to pay with a check or ACH. You've got to know how your subscribers want to pay.
As a business, you need a partner that will give you the ability to offer all of these payment methods. It's going to make it easier for you, the business, to bring those customers in your door. You're going to keep them for longer, which means that the lifetime value of that customer is much more to your business.
Obviously, collecting payment is one aspect of a payments strategy, but that’s not all. Think about getting that customer to the payment page. Do they have to go to a cart, fill in their information, and then check out? What if you could offer PayPal and enable one-click checkout?
We've seen a massive increase in people's conversion rates and reduced cart abandonment thanks to a great payments strategy. So they go to your checkout page and say, "Oh, PayPal one-click. Great." They can click out with that alternative payment method and get out a lot faster. So we're seeing a much higher conversion rate using APMs as part of your strategy. That's number one.
Number two is you've got to figure out the plans.
Do I allow them to self-configure? Does that customer have a portal that they can log into and at their leisure pause their subscription or pay a bill, or maybe update their credit card information? That's something that you have to think about when you're building out your product plan and your thought process: what are you trying to achieve, who's your target audience, and how do they want to interact with your brand?
When you talk about subscription businesses, think about the ones who are really trendsetters. Amazon and Netflix are two companies that are always coming out with new, innovative things. They both have a feature called Wallet, or the ability to put in a backup payment method. As a matter of fact, both of those companies offer you a discount to do so. They want the ability to capture a backup payment method so that if your first payment method fails, they can still process that transaction. Now, maybe that backup payment method is a credit card; perhaps your subscribers want to use one credit card for one subscription and a second credit card for any one-time purchases or add-ons. This is an interesting trend that a lot of companies are seeing.
One of the really interesting trends that we're seeing is Buy now, Pay later. PayPal came out with this a few months back and they allow you to purchase something—say, for the sake of argument, it’s $75—and split that payment over the next three months. So you only pay $25 each month, instead of trying to pay it all upfront, and then the company has your money immediately.
PayPal is here to change the game and they're doing it now interest-free with no penalty to you, the consumer, for spreading those payments out across the first three months. It’s a neat trend and they're going a long way with it.
Demographics are important, as we talked about earlier. You do not want to forget your target audience. If your target audience is millennials and you're only offering them Visa or MasterCard on your website, you probably need to find a new target audience because they're not paying that way. They're paying via Venmo, PayPal, Google Pay, Samsung Pay, Apple Pay. Each one of these has fees and implications. There's an annual recurring fee to offer those services. Then—who charges more, who charges less, what type of product are you selling, and where should it route through to give you, the merchant, the best result on the product you just sold? That's important, and it should be an important part of your strategy. You need to think about these types of things when you want to get into the subscription business.
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