Subscriptions have become the backbone of many business models, revolutionising how products and services are delivered. While subscriptions seem straightforward, implementing and managing them, especially in B2B contexts, presents significant challenges.
Here, we delve into the nuances between B2B and B2C subscription sales and what makes them uniquely tricky and consider how you can navigate them successfully.
When implementing changes to the customer lifecycle, focusing on the functional aspects of each stage can unveil critical areas of complexity. Here’s an overview of common pitfalls across the subscription journey:
Awareness:
Awareness is typically well supported by mature technologies, such as marketing automation, customer data platforms, and experience platforms. However, data quality is a key dependency. Compliance regulations require businesses to disclose their data on individuals, making robust data governance critical.
Evaluation:
Free trials play a pivotal role in the evaluation stage. Ensuring frictionless onboarding while capturing payment details upfront can enhance trial-to-subscription conversions. Clear communication about trial expiration reduces customer dissatisfaction and administrative burdens.
Purchase:
The purchasing process in B2B subscription sales is particularly complex due to two macro factors: the number of CRM platforms and whether different customers’ sales journeys have been appropriately segmented. Trying to wedge digital sales alongside face-to-face is a recipe for complexity. In our opinion, contact, account, and opportunity management should be standard and are well supported by the majority of CRM platforms. If you have more than 20 fields on any of these objects, then we need to look at why that is. Most complexity is driven by two items: product and pricing, and CPQ (configure, price, quote) and renewals. Fulfilment and order management is another extremely complex area. We will look at these issues in greater detail in a separate article.
Use and support:
Key areas of complexity during the use and support phase include billing and service. Subscriptions involve frequent adjustments such as adds, drops, and changes. Ensuring accurate billing requires good data quality and robust account hierarchies. International requirements for tax calculations and invoicing can be demanding. With service, GenAI is transforming case management, but core needs remain consistent and are well supported by platforms like ServiceNow, Zendesk, and Salesforce.
Retention:
Retention hinges on how automated and seamless the renewal process is. Customers should be able to accept offers or make changes effortlessly. Test friction levels throughout your processes to help retain customers and ensure customer satisfaction is high.
Key differences between B2B and B2C subscriptions
While B2B and B2C subscriptions share certain complexities, B2B subscriptions introduce unique challenges. Unlike B2C, where payments are typically upfront and card-based, B2B transactions often involve purchase orders and centralised billing. B2B buyers are frequently not the end users and may require more assistance than a B2C customer. Subscription renewal in B2C is digital or evergreen, unlike B2B.
The simplest use case for a subscription sale in a digitally fulfilled product (whether software, information, or video) is an individual buying access for themselves. We believe this should always be a digital sale, with assistance available if required. An example here is a Sky or Netflix subscription for a single user or a Sim-only phone contract. This customer journey describes the flow.
Here are some of the key areas that deserve special mention.
Price calculation and incentives:
Effective pricing strategies should include discounts to incentivise new customers, demand-based pricing to maximise revenue during peak periods, and loyalty-based rewards to retain long-term subscribers. Work towards creating pricing structures that drive acquisition while encouraging retention and maximising lifetime value.
Trial management best practices:
Trials can be powerful tools for attracting customers. Best practice involves capturing payment details upfront to ensure smooth transitions to paid subscriptions. Frictionless cancellation experiences build trust and eliminate frustration. Notifying customers before the trial converts to a paid subscription will reduce disputes and administrative burdens.
Simplifying payment structures:
An anniversary-based billing model (where customers are billed upfront for a defined term) simplifies revenue collection by eliminating the need for mid-term prorations. Card-based payments, PayPal, and other digital solutions reduce complexity and accelerate cash flow.
Entitlement and user access:
Clear entitlement processes, such as ensuring users can access the product immediately after purchase, prevent friction and frustration.
First-time login:
For new users, setting up login credentials for the first time should be simple, intuitive, and distinct from the experience of resetting a password. A well-designed onboarding experience sets the stage for ongoing engagement and satisfaction.
Taxation and invoicing across geographies:
Taxation requirements vary significantly by country and require careful compliance management. Invoicing must adhere to local formats and regulations, making automation and localisation essential for efficient operations.
Cash collections:
Complexity can be reduced at the point of sale by using card-based or digital payments, which allow businesses to validate and collect funds in advance.
Dunning and debt recovery:
Automated dunning processes, such as payment retries or notifications for failed payments, reduce manual intervention and improve cash flow while simplifying debt recovery.
Renewals:
Be upfront and transparent about price changes, especially inflation-related increases. Provide clear cancellation options if customers decide not to renew. We believe businesses should A/B test the friction levels to strike the right balance.
Revenue recognition:
Finally, subscription revenue must be recognised in compliance with accounting standards, often requiring businesses to spread revenue over the subscription term. We will look at this topic in more detail in a future article, but in short, ensuring proper revenue recognition processes is essential for accurate financial reporting and compliance.
Scaling complexity for multi-user scenarios
When subscriptions extend to multiple users (e.g., Netflix family plans), additional capabilities are required. In this scenario, we need to support different price points based on user counts or tiers and empower subscription administrators to manage their user profiles autonomously.
In B2B, this complexity multiplies and the following additional requirements need to be considered:
Omnichannel sales:
We need to be able to handle a wide range of sales relationships from a mix of account management and digital sales.
Discounting: For B2B customers, flexibility is key. CPQ tools allow users to customise products and services to meet their specific needs. We need the ability to handle discounting across all our relationships with the customer.
User entitlement management:
The best user experience allows administrators to assign or revoke user access dynamically. Different levels of approval for different levels of discount will be required. Consider the currencies you do business in and the exchange rate.
Reporting and analytics:
Administrators want visibility of what is being spent and by whom.
Customisable invoicing:
Large customers need a choice over how their invoices are organised, for instance, whether they are paid centrally or by different parts of their account hierarchy.
RPI and price realisation:
It’s likely that we’ll want to maximise revenue through marking to index and incorporating annual RPI-linked price increases into contracts.
Different product types:
It's likely that our customers are demanding different services and different ways of paying, including consumption, one-offs, and different subscription periods. This drives complexity into not just billing but CPQ and entitlement.
Cash collections:
This suddenly becomes complex as the ways your customers pay expand. Most B2B transactions are invoice-driven and often require POs and payment portals.
Customer success:
B2B products tend to be more complex than B2C products, and as a result, enabling the organisation to succeed, rather than the individual, becomes important to maximising the overall lifetime value of the customer.
Conclusion
Subscription sales are inherently complex, but a functional approach to analysing customer journeys can reveal actionable solutions, and B2B adds a layer of complexity on top of what is required to deliver B2C capability. By addressing pain points in awareness, evaluation, purchase, use, and retention and by leveraging the right technologies, businesses can unlock the full potential of their subscription models. Whether simplifying billing processes or empowering customers with self-service capabilities, the path to subscription success lies in mastering the intricate interplay of customer and operational needs.
If you need help navigating the complexity of B2B subscriptions, check out our subscription management services and get in touch to speak with one of our experts.
