Recurring Payments: Selling Monthly Subscriptions

Posted 4 years ago by Max Komonov

Recurring payments, or subscription billing, has become a hot topic in the ecommerce world, with many business owners making the switch to this payment model. This is largely due to the growing current customer demand and the opportunity it creates for sellers to completely eliminate repeated checkouts and purchases.

Subscription payments have become a shopping preference for many, with 69% percent of Americans acknowledging that they pay for multiple subscriptions every year, making it a great market opportunity for new and established business owners alike. Behind this business model lies a huge opportunity to earn regular and consistent income without relying on constant customer reach. This is optimal for businesses with a low ad budget and those who wish to improve customer relationships while creating long-term customers.

In this post, we’ll be covering everything you need to know about recurring payments, how they work, and how you can get started on recurring billing (there’s no need to invest a fortune upfront!). We’ll show you how it can improve customer retention and help you stand out from your competition. Our goal is to walk you through the entire process and help you decide if this is the right choice for your business.

What is Recurring Billing?

Recurring payments are the foundation on which businesses can charge their customers in a recurring way, either on a monthly, weekly, or simply yearly basis, for a set product or service. It allows business owners to leverage their sales and customer satisfaction by offering them affordable prices through the use of low monthly fees, all without having to significantly lower their profit margins.

Under the subscription business model, companies are focused on customer retention and building long-standing revenue more than the number of sales. The goal is to achieve steady and predictable income while gaining customers’ trust, which can hopefully lead to new business opportunities.

Ultimately, a business wants to keep subscription cancelations as low as possible. As long as you are gaining new subscribers faster than you lose them, revenue should keep coming in, and your return on investment should remain high. You’ll want to make sure to rely on suppliers that are willing to work a reasonable price for you, and choose a recurring payments plan that is designed for sellers to succeed without taking away half of your profits every month. At Ecwid, we are proud to offer affordable plans so new sellers don’t have to worry about high startup costs that lead many to close their online stores before they have time to mature into established businesses.

How Does Recurring Billing Work?

In a recurring payment model, sellers set a fee for their products or services that is then charged to the customer’s card information on file as an automated and recurring payment. These can be made under any paid period the seller chooses to add; it all depends on the product or service. Some products require a weekly subscription fee, some require monthly payments, while others only require yearly payments. In the end, it all comes down to what your customers feel more comfortable with.

Once a customer agrees to subscribe, they’ll be paying in advance for a product or service. For example, with a subscription box that is delivered once a month, the subscriber agrees to constantly pay a monthly fee with the promise that he or she will receive her subscription box on time.

A contract is made

Ideally, under the subscription model, both parties, the seller and subscriber, are entering an agreement that can be canceled if either of the parties fail to comply or if the subscriber wishes to cancel at any time.

When a customer agrees to subscribe and add their card information, they are stating they agree to be charged a monthly fee and consistently receive your product until they choose to cancel. Even if you haven’t heard from them in a while, they have agreed for you to continue charging them for your product or service until they go through a cancelation process.

This agreement helps them save time and money; they can now have these items delivered to their doors and helps them avoid a repeated checkout process.

This is a great way for them to save money since you can offer them a better deal than they would get by relying on the one-time purchase model. This is because, unlike a one-time product, under a subscription model, customers can customize their items, choosing only what is really necessary for them.

Also, recurring billing allows businesses to gain more revenue in the long run, which leads to lower prices for customers. Unlike traditional pricing, subscription pricing is based on the length of the subscription, making longer subscriptions the cheapest option. This is the key to how both customers and sellers can benefit from this unique model.

What Kind of Businesses Use Recurring Billing?

There are no exceptions when it comes to possibilities for subscription payments—anyone can add these to their store’s purchase options. Although not everyone can benefit from this unique way of selling. Like with any other marketing strategy out there, it can work perfectly for some while not so good for others.

Here are some of the most common businesses that use recurring billing, most of which you are probably a subscriber of:

Online service businesses

You’ll notice that most online businesses that offer non-tangible products that can’t be purchased on a one-time basis nor delivered to the buyer’s home rely on subscription payments. These include streaming services like Hulu, music apps like Spotify, ecommerce sites, online magazines, etc.

Membership services

It is rare nowadays to find a gym that doesn’t require a monthly or yearly membership fee. This is because it is easier and more affordable to simply register customers’ information and charge them a monthly fee rather than charge them every time they go in for a workout. This can become overwhelming and expensive, especially when many visit the gym daily.

Subscription boxes

You’ve very likely heard about subscription boxes like meal prep or cleaning products, or any other kind of subscription box. These are becoming very popular as many prefer to get a monthly delivery of all their essential items that can be paid for periodically in one big purchase. Not only is this more affordable and convenient, but it also comes with a lot of excitement and fun as subscribers eagerly wait for the newest addition to their next delivery.

As you can see, the possibilities are endless when it comes to starting a subscription business. These are just some of the most common ones to give you an idea of what is achievable under this model.

Key Factors When Choosing a Pricing Model

As you already know, the subscription business model is not necessarily for everyone, and sometimes even if your product is the perfect fit, things can go wrong without the proper expertise and understanding (or at least, a platform with a robust customer support service that can help you along the way).

To succeed with the subscription business model and choose the best pricing model for your business, make sure to:

Set adequate pricing that covers your products base costs, advertisement, maintenance, etc.
Understand your customer’s needs. Do they prefer a one-time payment or a payment plan, where these are broken over a set period of time?
Understand your competition and what is working for them.
Make sure to rely on a dependable subscription payments system.
Choose the best key messages for your audience that emphasize the value of your products and what these have to offer.

Recognizing and applying these should set you on the right path to success. Just remember that it all takes practice. To learn more about subscription payments and how they work, check out our 15-minute read guide How to Sell Subscriptions.

How to Start On Subscription Payments?

Starting a subscription business doesn’t have to be difficult. Once you have evaluated your options and decided you are ready to make the switch, all you need is a reliable payment platform.

Not every recurring billing service is a perfect match; this is why it is important to do your research. At Ecwid, we strive to make each of our sellers’ recurring billing as easy and convenient as possible.

This is how you can easily set up recurring billing with Ecwid:

Sign up with Ecwid. You’ll be able to set up your ecommerce site with no experience necessary.
Add your products and subscription terms and conditions to your site. This includes cancellation and return policy.
Go to this step-by-step guide for exact details on how to add recurring billing to your Ecwid store.

Get Started on Subscription Payments Today

There’s no need to make things complicated. Starting a subscription payments business is now easier than ever thanks to easy access to a wide range of resources available. If you still find yourself confused about how to start subscription payments, you can find more in-depth instructions in our Help Center. You can also reach out to our Customer Care team for one-on-one instructions.

We hope this guide helped you make the best decision for your business and offered you a clear and thorough explanation about the recurring payments business model. There is no time to lose; we encourage you to get started today and share your experience with us in the comments below!

About The Author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.