In an economy built around convenience and enduring relationships, delivering a frictionless payment experience is critical to revenue growth.
Payment is the moment of truth in customer relationships, when the cost of customer acquisition is converted into revenue. Yet, until recently, payments has been regarded as a commodity - something that you simply turn on and then look for ways to drive down costs.
But recently, something interesting has happened. The world’s most innovative subscription companies, among them Netflix, Spotify, and LinkedIn, have begun to rethink payments as a strategic driver that can actually add to the customer experience and increase revenue.
“At Spotify, we have moved away from a standard view of payments as a cost-base only. In fact, payments sits within the growth and conversion team, as we see it as a key driver of Customer Lifetime Value.”
- Federico Pezzotti Spotify
While many subscription businesses focus on a customer’s actions leading up to the checkout, industry leaders are taking advantage of tools and data that also optimize what happens after a customer enters their card details. We divide those actions into two categories:
- Initial transaction. Card validation, payment methods, and risk management can ensure the first transaction, that moment of truth, is successful.
- Subsequent transactions. Tools like Account Updater, retry logic, and billing cycle optimization can increase the likelihood a customer will stick around.
By putting a laser focus on both the initial and recurring transactions, companies like Spotify are seeing considerable improvements in two critically important metrics: customer lifetime value and customer retention.
From failure to revenue
Take a closer look at the direct effects payments have on revenue and long-term sustainability of subscription business: roughly 10% of payments fail for reasons ranging from technical failure to lost cards to insufficient funds. But with the right tools, this 10% failure can be whittled down to only 1-2%, resulting in potentially millions of dollars in extra revenue and a considerable impact on the top line. For a more in-depth look at the levers we recommend pulling to achieve these savings, check out 5 Payments Insights for the Subscription Economy.
Payments as part of the customer experience
Another important element in retaining customers is making sure the overall customer experience is flawless from a payments perspective – both at signup and for subsequent transactions. The best experiences remove barriers and unnecessary steps from the checkout flow. Businesses focused on a global offering often quickly realize that credit cards are not the preferred method of payment everywhere (e.g. Germany, China). Offering localized payments like bank transfers or mobile wallets will attract that initial customer and keep them engaged long after. The goal of every subscription business should be to make the payment experience so seamless that a customer can continue to stream music, watch movies, or open a box of their favorite product without worrying about how they are paying for that experience.
Download the full infographic here to see how payments can drive customer lifetime value.
Slava Balter manages strategic partnerships at Adyen, working with leading providers like Zuora to ensure clients benefit from the best integrations and most seamless experience. He’s worn many hats prior to Adyen, ranging from Vice President at J.P. Morgan to head of Business Development at enterprise messaging upstart Convo.
Adyen is a technology company that provides businesses with a single solution to accept payments anywhere in the world. The only provider of a modern end-to-end infrastructure connecting merchants directly to Visa, Mastercard, and all key payment methods globally, Adyen delivers frictionless payments across online, mobile, and in-store. When you integrate with Adyen for your subscription and recurring payments, you'll be able to accept cards, as well as other payment methods, such as SEPA Direct Debit and iDEAL/Sofort to SEPA DD. This means you can provide a local experience to your global customers.
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