Over the last few years, software billing has moved from one-time licensing to recurring subscription billing.
With big names like Microsoft Office and Adobe’s Creative Suite turning to subscription pricing models, SaaS marketplaces need to look into this model and understand why it is becoming so popular.
Understanding subscription billing
Most SaaS businesses are switching from the one-time licensing to the subscription business model. But which are the differences?
With the one-time licensing, customers buy a perpetual license to a product and then they pay if they want to upgrade or receive new versions.
With the subscription model, customers activate a recurrent subscription to a product you distribute. A subscription is an ongoing payment on a periodic basis to use the service. The subscribers provide their credit card information and you withdraw the payment on a regular schedule until the subscription expires or/and is cancelled.
Benefits of the recurring subscription model for software vendors
As a marketplace manager, you should know which are the benefits of this model for your vendors because they can have a direct impact on your business too.
At the end of the day, vendors and marketplace managers have the same goal: generate revenues.
Subscription billing can drive more revenues than one-time fee licensing. As a matter of fact, there are no interruption between billing cycles and a lower and more customized pricing point can attract more customers. For example, the fact that customers can choose among monthly, semi-annual or annual payments can be very attractive for low-budget professionals or SMEs.
What is more, the subscription pricing model means that your vendors can rely on a stable cash flow. In this way, they are able to forecast their revenues more accurately. There is no need to specify how this reflects on your marketplace too.
Lastly, if you run a marketplace, you should consider that cross-selling is much easier. Your customers could take advantage of bundles and discounts, making you sell more.
Subscription billing allows to distribute sales over time. The constant growth will certainly please your vendors, but it will please you as a marketplace manager too. As a matter of fact, you will see a regular and continuous growth during the year instead of individual peaks.
Not to mention that this will have a positive impact on your stakeholders and shareholders, who will be delighted by the ongoing growth.
When you sell SaaS services through a subscription model, your prices are transparent and less negotiable by definition. Usually, the relationship starts with a low cash outlay, and this already reduces the negotiation power of your customers. Moreover, the transaction is completed online, often without contact between sales representatives and purchase departments.
Most customers appreciate subscription pricing billing because it allows them to choose the plan that better suits their needs. Also, it gives them the freedom to upgrade their subscription or to cancel it.
For SMEs flexibility can be extremely important because they do not feel locked in a plan: for example, if they hire new employees they can upgrade their subscription, while when employees leave they can discontinue it.
Also, the one-time payment can be cheaper in the long run, but the entry cost can be a barrier for many professionals or small organizations.
5- Offers and discounts
With the subscription billing model, you can create numerous offers and discounts. For example, you can create special promotions to discount certain plans or discounts on certain products. Also, as a marketplace administrator, you can create product bundles, which is a great way to promote the products you distribute.
When you are selling SaaS services online, the possibility to get creative with offers is crucial to boost your sales.
How you can implement subscription billing models in the Cloudesire marketplace
The Cloudesire marketplace offers the maximum flexibility when it comes to business models. One-time payments, pay-per-use or subscription models are all available on the platform.
Also, it allows the generation and distribution of coupons to manage promotions and discounts.
And if you are interested in bundles, the feature is available to all marketplace managers too!
Do you want to learn more about the Cloudesire marketplace?