Swimming in SKUs?Keep Agile with Subscription Pricing
March 20, 2014
Steve Adams
Agenda
• A look at real world pricing– Coping with rapid changes– Complexities of Subscriptions
• Agility
• The reinvention of Billing
• How Fusebill can keep you from drowning – Quick Demo
It’s one of the simplest of truths For a subscription business to make
money, it must bill and collect from customers.
bill
collect
make money
Poll #1
Too bad it’s simpler to say than do
The devil’s in the details of requirements and architecture.
Traditional systems are slow, inaccurate and unable to scale
The expanding Subscription World
Purr-Packs for cats
Things start our easy enough– B2C example
Razor Blade
Service $10/m
Shaving Cream Service $10/m
Premium Skin
Creams $20/m
Basic Razor handle$20
1time
Premium Razor
Set$50
1 time
But that soon changes96 combinations of products, term
Razor Blade
Service $10/m
Shaving Cream Service $10/m
Premium Skin
Creams $20/m
Basic Razor handle$20
1time
Premium Razor
Set$50
1 time
Throw in some bundles…
$15
$25
Razor Blade
Service $10/m
Shaving Cream Service $10/m
Premium Skin
Creams $20/m
Basic Razor handle$20
1time
Premium Razor
Set$50
1 time
Razor Blade
Service $10/m Shaving
Cream Service $10/m
Razor Blade
Service $10/m
Premium Skin
Creams $20/m
Shaving Cream Service $10/m
Some incentives, some discounts….
$15/m
$25
$200/year
$200/year
Razor Blade
Service $10/m Shaving
Cream Service $10/m
Razor Blade
Service $10/m
Shaving Cream Service $10/m
Premium Skin
Creams $20/m
Razor Blade
Service $10/m
Razor Blade
Service $10/m
Shaving Cream Service $10/m
Shaving Cream Service $10/m
Basic Razor handle$20
1time
Basic Razor handle$20
1time
Premium Razor
Set$50
1 time
Premium Razor
Set$50
1 time
Basic Razor handle$20
1time
Premium Skin
Creams $20/m
Shaving Cream Service $10/m
Razor Blade
Service $10/m
And don’t forget price testing….
$15/m
$25
$200/year
$200/year
Razor Blade
Service $10/m Shaving
Cream Service $10/m
Razor Blade
Service $10/m
Shaving Cream Service $10/m
Premium Skin
Creams $20/m
Razor Blade
Service $10/m
Razor Blade
Service $10/m
Shaving Cream Service $10/m
Shaving Cream Service $10/m
Basic Razor handle$20
1time
Basic Razor handle$20
1time
Premium Razor
Set$50
1 time
Premium Razor
Set$50
1 time
Basic Razor handle$20
1time
Premium Skin
Creams $20/m
Shaving Cream Service $10/m
Razor Blade
Service $10/m
$12/m
Poll #2
The ‘Easy’ Solution
• Create a SKU– Uniquely identify every combination IN ADVANCE
• Maintain a secret decoder ring spreadsheet to interpret
• Reports? Tracking? Visibility? Accounting? Inventory?
Security Services - Product Bundling Example
• 12 month subscription– Paid quarterly, in advance– Recognized over 12 months
• Hardware– Delivered when project starts– Invoiced (30 day terms)– Revenue recognized on shipment
• Integration project (development services)– Paid in installments– Recognized over life of contract
Bundling & Revenue Recognition Complexities
ActiveWin Integration
Services
Cash
EffortEarnRevenueMonthly
CollectQuarterly Delay Start
EarnRevenueMonthly
Ship & EarnRevenue
Collect
Subscription
Hardware
IntegrationServices
Poll #3
Easy Solution?
• Custom tracking for every contract
• Proliferation of spreadsheets that are manually updated
Proliferation of SKUs – hard in real life
Pro Rate Changes
Upgrades
Promotions
Switch Plans
Discounts
Can an Agent cope
with complexity?
Can customers? Self-Serve?
Agility helps with
• Accounting• Automation• Accuracy• Analytics
Advertise
Web Visits
Conversions
$$$$$
Build Repeat Business
One Decision – multiple orders
Transactional back office systems fail
21
Upsell
Cross-sell
Renew
Recurring Billing
Multiple Concurrent
Subscriptions
Usage Based Charges
Credit CardExpiry, Fraud, etc.
Initial SalesProcess
Traditional transactional systems don’t support recurrence
What’s Needed?
• Hierarchical structure to the pricing catalog– Not just long lists of SKUs
• Flexibility to create bundles, with optional products
• Ability to over-ride prices and names for each customer
So What Happens?
• Improvisation– Track in Excel– Ticketing systems
• Pilot Projects– Quick and Dirty development projects
• Or long and twisted development projects
Security Risks
Errors & Revenue Leakage
Lack of Visibility
Barriers to Scale
Offline Accounting
24
Products, Plans and Dates in Fusebill 2014
Products are ‘what’
Plans group products togetherSet price and schedules“How? How Much?”
Subscriptions link Customers to PlansAllow customer specific pricingKnow about Dates
Customers
Catalog – What, How, How Much
• Concepts– What?– How?– How Much?
• Catalog– Products– Plans (aka packages of products)
– Pricing
Poll #4
Products - What
• Each “thing” you are selling– Add on services Recur
• Can control earnings• Ex. Tech support, Extra Access
– Physical Goods• Earn Instantly• Ex. Equipment/Devices, Chocolate Bars
– Non-Recurring Services• Can control earnings• Ex. Home installation, Administrative fees
One Time
Recur
Plans
• Plans– What is it?
• Basic Plan – Setup Fee– Charge
• Products in Plans (optional)
– Package up multiple products
When Do I Need Products?• It costs extra• It’s optional• Need it displayed on an invoice• More than one can be purchased• Control over service• Reporting• Inventory Tracking
Free Features
Optional Features
Multiple Quantity
Frequencies
• Same plan, multiple frequencies• Manage One Plan with multiple frequency prices
– Ex. Monthly vs. Annual Pricing
• Don’t create new plans for each frequency
Multiple Currencies
• Currencies need to be enabled – by default, single frequencies
• Plans hold pricing for all enabled currencies – need to specify pricing
• All Pricing– Plan setup/charge– Products in plans
Schedules – Control when charges appear
• Life of a Subscription– Activate– Charges on Activation– Expire on schedule
• With Scheduled Activation– Charges on Provision– Charges on Activation– Expire on schedule
• Product Start Dates– Delay the start of individual products
Draft ActiveCancelled
Expired
ActiveCancelled
ExpiredDraft
Provisioning
Accounting
• Accurate Taxes
• Discounts, Write-offs
• Earned vs Deferred Revenues
• Cash vs Revenue
Agility – cope with pricing changes• Pro rating
• Upgrade Options
• Variations
• Promotions / Coupons
• Customer lifecycle:– Cancel– Renew– Options
The key benefit of automation is automation…
• Process Payments – Automate collections, retries, client notifications
• Process renewals – and expiries
• Reduce people power – increase ability to scale
• Outsource security issues– Note that most shopping cart platforms don’t store
credit cards
Poll #5
Accuracy
• Get paid before shipping– Properly calculate amounts (discounts, coupons, taxes)– Collect automatically
• Notify downstream systems of problems!
– Invoicing and Account statusing
• Ship the right things– Manage change– Customer self-service– Central view of customer orders
• Stop delivering …
Analytics
• So, what are we selling anyway?
• What geographies are performing well?
• What online programs bring us long term customers?
• How long do customers subscribe for?
Brief Walkthrough
Basic offering –Premium Plan –Options to purchase extra or upgrade