What Is Subscription Management? The Complete Guide

Subscriptions come with great promise to build customers for life and drive predictable growth. But moving to a subscription business model doesn't come with a guarantee that you'll realize its benefits. Enter subscription management: It puts your subscription business on a launchpad. Then it lights a flame.

Thirty years ago, the subscription business model didn't exist beyond media publications. Now it's becoming a standard, especially for software and technology companies that use it to grow businesses with more predictable sustainability.

Below we'll look at how subscription management helps CFOs and CROs create world-class buying and paying experiences — driving loyalty, renewals, and growth.

• What is subscription management?
• Why is subscription management important?
• What are the most common subscription pricing models?
• How do you track recurring subscription revenue?
• How does a subscription management solution work?
• Choosing the right CRM to manage subscription sales
• Ensuring customer satisfaction and retention

Subscription management is the process of handling customer subscriptions, whether of a recurring product or service. This helps businesses optimize their subscription delivery using tech-driven automation and shared data. On the business side, good subscription management helps organizations reduce their customer churn rate, automate billing, and create recurring revenue.

The right solution for subscription management allows organizations to track various subscription models, and B2B sellers use it for cross-selling, upselling, contract renewals, plan updates, and more. It also equips them to help customers manage the details of their subscriptions beyond basic renewals, such as adding more seats to an existing subscription.

Point yourself in the direction of your dream: a subscription business that hums with predictable growth. That only happens when customers continue to renew, and subscription management makes this possible. It helps you create easier and faster experiences that keep your customers active, from buying the product to using it and paying for it.

With one-time sales, you hit your targets by acquiring new customers. But in a recurring-revenue business — such as those that run on subscriptions — revenue depends on retaining existing customers who pay on time and renew. In fact, in the most recent State of Sales report, sales leaders named "recurring sales" their top revenue source, followed by cross-selling and upselling. What does this mean? Today's businesses are seeing most of their revenue growth come from existing customers, not new ones. And that falls right in line with the goal of subscription management: keeping your customers engaged so you achieve top-line subscription growth.

Imagine this: A customer has to call up a sales rep every time they want to buy a subscription. When they want to make a change request, they have to dial up that rep once again, and the rep calls finance. That's clunky. It's clunky behind the scenes, too, as teams wrestle with spreadsheets to update invoices and apply credits manually.

With subscription management, the scenario looks different. The same customer buys and updates their subscription instantly — online. But they have the option to engage with a sales rep to seek extra help when necessary. Updates such as pricing changes are applied to the bill automatically. It's a string of positive interactions that leads to happy customers and renewals.

There's a lot that subscription management handles in the background to make this possible — bringing customer data into one place, replacing disconnected tools with one platform for every team, and running automation and AI-powered analytics throughout. What it all comes down to in the end is experience.

There are many different kinds of subscription pricing models to choose from, but some of the most common ones follow. No one subscription model is better than the others; each is designed to support specific product/service types and customer needs. Here's how they work:

1. Static pricing: A fixed price is used for each product, as defined in your pricebook.
2. Usage (or consumption) pricing: A price is based on usage. For example, an internet provider might offer 2GB of data for $10/month and 5GB for $15/month.
3. Contracted pricing: This is a pre-negotiated price per license. This pricing model is important for self-service because it doesn't require negotiations with sales reps to purchase more.
4. Percent of total: One product is priced as a percentage of another. For example, add-on support is offered at a price based on the cost of software or hardware.
5. Block (or tier) pricing: A price based on quantity blocks or tiers. For example, a company selling enterprise software might charge $200 for one to five licenses, $150 for six to 10, and $100 for more than 11.

Here's a look at how key industries are putting subscription pricing into motion.

Software as a Service (SaaS)

In 2021, a networking-tech concern declared that the "cloud is the new data center" and launched a program giving customers the option to pay for hardware with a monthly subscription rather than a single upfront fee.

Financial Services

A financial services firm launched a subscription financial planning option as one of its advisor services. Customers pay $30 monthly on top of a $300 one-time planning fee.

Communications and Media

A news service revamped with a subscription focus in 2021. Readers pay $34.99 per month for industry coverage. The CMO calls it "the largest digital transformation in a decade."

Manufacturing

Two years ago, an elevator manufacturer launched a subscription model, selling its hardware as one-time sales with a monthly support services subscription on top.

Retailers

Many clothing retailers offer subscription pricing models for monthly product bundles. Beauty and skincare brands also set subscription payment options for recurring orders.

Building and combining the right pricing models helps you tailor your subscriptions to the customer so they sell. Subscription management helps you maximize the revenue you get from them. The goal is to create recurring revenue growth. We share how to track it below.

In business, you are what you measure. To track recurring subscription revenue, you need to choose the right metrics to perform against. The two most popular recurring revenue metrics are monthly recurring revenue (MRR) and annual recurring revenue (ARR).

In a traditional business-to-business (B2B) business model, customers might sign up for multiyear contracts and pay in installments or sign up for short-term engagements with no renewal period. In either example, revenue streams and sales pipelines are spiky because they depend on new sales.

By contrast, a subscription business depends on regular renewals of existing sales. So unlike one-off sales revenues, recurring revenue is predictable. You can count on it to occur again and again, which makes it easier to plan ahead. That's why increasing your MRR and ARR can be powerful new goals.

MRR = New customer subscription revenue + Existing customer subscription revenue + Add-on and license upgrade fees from existing customers – Lost revenue from customers who leave – Lost revenue from license downgrades or removed add-ons

ARR is calculated the same way as MRR, but instead of predicting revenues month by month, you're predicting them for the next year. (Read this article for a deeper dive.)

If you have the right subscription management tool in place, you won't have to worry about calculating this manually — the work will be done for you. But you need a CRM that gives every team total customer visibility, together with the automation and analytics to help.

Let's dive into how subscription management software can help make this possible.

1. Customers shop and pay for B2B products over any channel, including self-service.

Administrators can easily set up new subscription products alongside one-time products, with options to pay according to different pricing models — and push those products out over self-service channels such as your website. Customers can then select products or connect with reps for more help before purchasing.

2. Sales reps step in to capture customers who need help and close deals fast.

When a customer requests changes to their order before purchasing, reps can go into the subscription management tool and easily update deals on the back end — by changing quantities and applying discounts, for example. Then, they can push out the new pricing and terms to the customer to close the deal without leaving money on the table. Subscription management solutions can also ensure your teams are set up to facilitate auto generation of opportunities or quotes to customers.

3. Sales and customer success teams work hand in hand with technology.

Here's where it's essential to track your customer journey and manage your subscription lifecycle. Communicate with customers, share their feedback internally, and review usage reports to understand how customers use your product. Is your team engaged with their success through regular check-ins? If not, why would they continue to use your product?

While customers get the flexibility to make changes to their subscriptions as needed via self-service channels, your reps can also gently help guide them through renewals or inform them of upgrade options, with revenue intelligence lighting the way. On the back end, your teams can use a subscription management solution to gain visibility into customer buying history and behavior, while AI subscription management tools recommend the next-best offers to send. In fact, with an AI-powered CRM, you can reduce churn using automated customer communications such as renewal quotes and midterm change notifications.

Use subscription lifecycle management software to set up auto-renewal campaigns that protect revenue and create a smoother CX. Many businesses prepare messaging that includes a self-service renewal process three or four months prior to a customer's renewal period.

4. Finance creates accurate invoices and gets paid on time.

As customers buy and make changes to their subscriptions, all these transactions are managed automatically on the back end with existing CRM and billing systems. Thanks to integration, finance teams no longer need to create one-off invoices. Instead, they can set up recurring billing, payments, and collections.

This automation is made possible with the integration of customer data across every touchpoint in the subscription buying journey. It replaces all the manual handoffs between sales and finance that can lead to errors and bad customer experiences. Now, finance can be confident that the quote always matches the invoice.

Now that you know how subscription management works, let's look at common pricing models that you can use to get your subscription business off the ground.

To manage subscription sales effectively, including the delivery of a smooth CX, I can't overstate the importance of selecting the right CRM. This tool is instrumental in maximizing revenue, optimizing subscription models and pricing, implementing upselling and cross-selling, and leveraging analytics for growth.

When evaluating various solutions, consider whether each one allows you to manage the entire revenue lifecycle and:

• Take advantage of AI that supports account management, including when subscriptions terminate
• Forecast subscription insights
• Use AI-powered tools to improve opportunity tracking, translating them to quotes and orders
• Support upselling and cross-selling by accommodating incremental adds to the subscription
• Manage various subscription tiers, with tracking and pricing for each one
• Report on analytics that help you understand customer trends
• Adjust pricing models with increases tied to additional features

Customers in the subscription business model still need nurturing, so don't adopt a "set-it-and-forget-it" attitude. Check in with your customers. Ask how you can improve your service and your offerings. Organizations that use a subscription model must ensure a smooth process for responding to their customers' needs and requests. When you make customer success part of your subscription management, your team will boost customer retention.

These are subscription management best practices that help deliver an exceptional CX:

• Use email campaigns and CRM ticklers to remind your customers and your sales reps about upcoming renewals.
• Create automated reminders, or ticklers, to power support-call response and offer help based on customer behavior and usage data.
• Ensure your self-service portal and related tools are easy to find and navigate.
• Regularly inform customers about all the features and benefits they're entitled to as part of their subscription.
• Communicate ahead of new releases; share information about upcoming benefits and offer training sessions for new features and updates.
• Schedule customer success check-ins that add value and build the relationship; that makes it harder for customers to cancel their subscription and waltz into the arms of a competitor.
• Share personal invites to webinars and regularly remind customers what's available to them in your resource library.

As innovations to subscription offerings and pricing models continue to evolve, sales teams will need flexible subscription management systems that can be configured with customizations. That allows them to adjust and take advantage of new opportunities. Starting with an adaptable subscription management solution and CRM today will likely pay dividends in your organization's adaptability and agility moving forward.