Business operation software or Enterprise resource planning (ERP) solutions were the entire trend in the 1990s. The prime focus of the solution was to modify outdated, disconnected back-office systems into a single, gleaming unified package for sales, procurement, accounting, staffing, customer service, and more.
ERP is business software that directs and integrates the primary aspects of a company’s operations. Although ERP systems excel at handling one-time transactions, they fall short when it comes to dealing with the intricacies of recurring income. During the pandemic, we witnessed this.
At that time, the business operating model underwent several adjustments. One of the most substantial changes was the rise in the usage of subscription-based services aided by the ability to work from home. In 2021, the customer bases of subscription-based businesses rose by an average of 31%. Most services today feature subscriptions irrespective of the industry.
4 Major Concerns of the Subscription Industry
As your business expands, you’ll run into certain serious issues that an ERP isn’t designed to address.
- Decentralized Customer View
It’s difficult to get to understand your subscribers and form healthy relationships that lead to lower churn and boosted upsells.
There aren’t several independent systems that make operating KPIs like annual recurring revenue or monthly recurring revenue easier to measure. ERP systems are designed to monitor items rather than customer relationships.
But the evolving digital world demands new strategies to evaluate and monetize consumer connections in the subscription economy.
A subscription management platform manages the full subscription lifetime. It enables you to have a clear picture of a client who joins online, buys or upgrades their plans, and so on.
- Difficult Subscriber Management
Clients have seen the same conflict play out time and time again when attempting to use standard ERP to manage the subscription side of their business.
Workflows and fundamental processes in ERP systems were, and continue to be, intrinsically built to monitor the life cycle of the product. The recurring billing software, on the other hand, changes the paradigm of holding and controlling the subscriber’s life-cycle, which is significantly faster-paced and effort-packed.
A subscription management system flips the conventional business model on its shoulder.
It enhances continuing client relationships by making their jobs easier and providing better solutions.
- Difficult Revenue Tracking
A subscription has 26 revenue-related transactions on average during the course of its lifespan. Whenever a subscriber upgrades or downgrades a plan, it incurs additional costs, effort to the organization. With more customers, the complexities grow dramatically.
ERPs aren’t meant to manage the income linked with subscriptions modifications such as renewals, expansions, and add-ons since they’re based on the idea that businesses sell items.
The capacity to evaluate the links between reservations, cash flow, invoices, and revenue is crucial to the growth of today’s subscription organisations. The bottom line might suffer if your solution is unable to join the dots.
- Usage-Based Pricing
Customers are opting for ‘as-you-use’ deals over significant upfront payments and software management costs. Counter-offers, cross-selling, upselling, and timed promotions must be sensitive to the evolving wants and desires of the subscribers. Prices and offers should be easily stretched.
Traditional ERP systems lack the visibility needed to monitor client data and interactions as well as the means to detect subscription changes.
You’ll need a system that can handle the complexity of many plans, and a variety of terms. It should also be able to manage a number of payment methods across an expanding user base as your invoicing and collections expand.
In a nutshell, ERPs are unable to:
- comprehend the idea of recurring revenue
- keep track of plan changes, renewals, and add-ons
- assist companies in developing as-you-use pricing strategies
- inform businesses on the number of active clients they have
- provide a single view of customers, invoicing, transactions, products and services for businesses
The interconnectedness of an array of systems is crucial in the subscription industry. It’s pivotal not only to pick the correct methods to help you achieve your goals, but also to put them in the right order. Subscription firms must first address the consumer problem before addressing the financial issue. Hence, a business should analyse all of the factors mentioned above before deciding on a solution.