Hybrid Billing Models: Taking the Best of Both Worlds

You read in Forbes that subscription businesses are building revenue NINE TIMES faster than the S&P 500, even more so in the B2B space (22%) than in the B2C space (16%). You know the subscription economy is here to stay and you must adapt or die. But, you just don’t see how you can integrate a subscription sales model into your existing business. 

And, it’s not just the subscription economy that demands change. Your customers want personalization. If they’re like the people surveyed by Epsilon, 90% of your customers want personalized services and 80% are more likely to do business with you if you personalize their experience.

That sounds like two huge problems you need to solve, doesn’t it? But, in fact, they are two facets of a single problem: how to come out on top in a fast-paced, customer-driven, hyper-competitive marketplace. And, this problem has a solution: hybrid billing. Lucky for you, BluSynergy has experience with this and we love to share what we know.

Understanding Hybrid Billing

Hybrid billing combines one-time sales and subscription models. In the B2B space, let’s look at software. Believe it or not, you can still buy Microsoft Office Classic as a stand-alone product for a fixed price. Or, you can subscribe to Microsoft Office using a subscription model billed per user, which comes with continuous cloud-based updates. You can also subscribe to Office and personalize their experience.

In the B2C space, let’s look at movies. Walmart uses a one-time sales model; you can go to Walmart and buy a DVD. Netflix uses a subscription model, where you pay a monthly fee for access to DVDs delivered by mail, online streaming movies, or both. Amazon offers a hybrid model; you subscribe to Amazon Prime, which gives you access to streaming movies, but you can also purchase DVDs or stream pay-per-view movies.

From a business standpoint, hybrid models have the power to generate more revenue while meeting customer demands for personalization. Everyone wins!

Benefits of Hybrid Billing

Customers love hybrid options. They get the convenience and simplicity of subscriptions, which save them time and, typically, money. But, they don’t have to agonize over which package to buy and whether is meets all their needs. They don’t have to worry about paying for products or services they don’t want and won’t use. With hybrid models, your customers won’t feel like they’re compromising. They can choose the subscription package that best fits their requirements and price points, adding on one-time purchases that meet their unique needs and wants. If they can’t afford everything they want when they subscribe, you can offer them a way to add-on in the future. You have created a personalized, customized purchasing experience for your customers. They feel in control. They believe you have their individual needs in mind. They feel special. 

And, because you met your customer’s needs, you increased their purchase satisfaction. This creates brand trust and brand loyalty, which translates into customer retention and consistent recurring revenue for you. Well done! And, hybrid models make it easier to define your pricing structure. You don’t need to try to figure out what your customers want or confuse the sales process with dozens of bundles. You can let your customers tell you what they want, creating a sales experience where price reflects actual value.

You have also created a secondary revenue flow, because you can continue to offer add-ons to your subscription customers. You can also collect data on their usage, which will allow you to better target your marketing efforts to the personalized needs of your customers. This is called using big data. If you don’t know about big data, be sure to read our blog post on why big data matters. 

Accounting and Hybrid Billing

About the only downside of hybrid billing is keeping the customer’s purchasing experience simple and your internal accounting accurate, especially in light of the new ASC 606 requirements. 

From the customer experience perspective, customers must be able to pay for their subscriptions and customized add-ons in a single seamless purchase. 

• Your catalog of subscription products and services, as well as your add-ons,  should be integrated. This allows your prospective, new, and existing customers to easily find specific items, browse your full product or service line, and make purchases.
• Your payment systems must be aligned so that both subscriptions and add-on purchases can be paid for in a single transaction.
• Invoices must be synchronized to reflect a single transaction as opposed to multiple transactions; this is especially important if you run a B2B business.
• Confirmation emails should be coordinated, so that one email is sent for the entire transaction rather than separate emails for each product or service.

From the internal accounting perspective, your billing and payment software must be adapted to handle your customer needs. Your drip marketing will need to be adjusted to market the right add-ons or bundles to the right customers. If you use a CRM like Salesforce, you may need to tweak how you input and manage your data.  

BluSynergy is here to support you in adapting to the subscription economy, whether you’re implementing a subscription model, hybrid billing, working to master big data, or simply automating your fixed sales. Let us help you design a subscription sales or hybrid sales strategy that integrates seamlessly into your current business model while capturing the big data you need. We believe there is always room to grow! You might be surprised with what we come up with for you!

Give one of our BluSynergy sales consultants a call today at 731-INVOICE (731-468-6423).

Image by Sarah Richter from Pixabay