Out of the 4 Ps of marketing, ‘Price’ is one of the trickiest jobs for marketers and decision-makers. Though the pandemic created havoc in our professional and personal lives, one positive outcome of it was that consumers today demand convenience and accessibility. This paradigm shift is changing the overall business dynamics and how people pay.
Further, as the business landscape is getting overly competitive, consumers are becoming more specific about how they wish to spend on products and services. Hence, many industries have shifted to recurring billing solutions, where users pay a monthly or annual fee. The recurring revenue model is no longer just limited to Netflix or OTT applications as other industries such as healthcare, financial services, automobile, transportation, and even groceries resort to recurring billing management.
Why Recurring Revenue Model?
Fixed pricing works on a predefined set of factors, giving less importance to what customers truly want. On the other hand, flexible pricing is more open to what customers want and they’re charged as per their usage. Having said that, flexible pricing ensures that you’re able to offer personalized services along with tailored pricing modules, giving utmost convenience and satisfaction to customers.
Indeed, organizations start with a fixed pricing model initially to attract customers, but later on, customer retention becomes a challenge. Fixed pricing enables you to sell the product only once when you acquire them, but organizations tend to sell the product regularly with a recurring revenue model.
Here, you eliminate the challenge of customer retention. Not to forget, acquiring a new customer is more expensive than retaining one. Organizations might earn less per sale with a recurring billing system but ensure consistency in revenue. Moreover, they can even predict revenue, reduce risk, and plan budgets with higher certainty.
Why Should Businesses Choose Flexible Pricing Over Fixed Pricing?
One of the significant drawbacks of fixed pricing is that organizations cannot make room for market fluctuations and volatility adjustments. The customer has already paid the price irrespective of the changes in cost dynamics.
With flexible pricing, customers can access services for a much lower monthly/annual fee. Users have the liberty to scale up, scale down, or discontinue services whenever they want to. The cherry on the cake is that users do not bear any initial investment loss.
Further, customers have to pay the total cost of the service upfront. But with flexible pricing, customers do not have to worry about high one-time costs as it is spread out through the long run. This way, users can effectively manage their personal financial budgets.
Over and above that, subscription businesses have to pivot to changing customers’ buying habits. As many B2B companies shift to usage-based pricing, businesses need to offer a pricing module that aligns with customer demand. That’s when a flexible pricing module comes into the picture, as it enables organizations to adapt to changing and emerging pricing approaches.
Ultimately, when customers see that businesses are willing to be flexible as per customer expectations, they tend to stick around for a longer period, improving loyalty and customer retention and increasing customer lifetime value. Businesses build long-lasting customer relationships and foster a culture entrenched in value.
Phasing in Traditional Pricing Model with Subscription Models
While subscription-based billing is the need of the hour for modern businesses, it doesn’t mean that organizations have to shift from their traditional pricing system completely. They can phase in subscription billing management with traditional pricing models. Recurring revenue models can augment the value of conventional pricing models through upselling, cross-selling, and bundling.
Further, organizations need to interact with customers and understand their preferences constantly. Accordingly, they can introduce customer-level personalization and bulk action capabilities to generate recurring revenue and scale up the business. All you need is the right recurring billing platform to help you get aligned with the fast-paced marketplace seamlessly.
Magnaquest Sure’s agile and flexible capabilities help you determine an optimal pricing strategy for your current business model. With Sure, you can adapt to changing customer and market demands, increase revenue, and ensure retention and growth, irrespective of what the future brings. Click here to take a demo.