swimming in skus: keep agile with subscription pricing

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

Contact Fusebillsales@Fusebill.com

stevea@Fusebill.com1-888-519-1425