To DIY or Not to DIY?
Integration. Payment processing. Customer support.
Design and development.
It may seem like building a subscription billing solution — and integrating it with your other business systems — is something you can handle on your own. After all, why should you pay ongoing fees to a provider when you have the resources to manage everything in-house?
The Costs of Subscription Billing Add Up Fast
But many costs are often overlooked or not accounted for when comparing in-house and outsourced subscription billing solutions. In order to determine the true cost of your solution, you need a full cost breakdown and clear visibility into everything that global subscription billing entails.
What you may find is that all of the everyday tasks involved with managing your solution in-house are preventing you from growing into new markets and identifying opportunities for optimization.
Let's Break It All Down
This is your handy guide for identifying and evaluating the costs associated with managing an in-house subscription billing solution.
Salaries of designers, front-end developers and quality assessment specialists
$75,000-90,000 per hire
Design and development software (InDesign, Illustrator, Photoshop, etc.)
Staging site and technology for implementing/testing changes
GeoIP technology for detecting browser language and IP address
Optimizing your subscription pages and purchase process for new and existing regions involves significant localization tasks — including translating text, accommodating double-byte characters and displaying relevant form fields in the right sequence. Displaying localized pricing, payment methods and currencies will inspire customer confidence and increase conversions.
Testing the design and layout of your online sales process is key to optimizing conversions. You also need to keep up with evolving design trends, frameworks and features and test these regularly.
Customers expect a seamless experience regardless of whether they're using their PC, tablet or phone, so you need to invest in resources for delivering responsive design across devices.
Quality Assessment (QA)
QA is an integral part of launching redesigned or reconfigured subscription pages or purchase processes. If you're testing internally, you'll need a good six to nine months of user data before you can draw any real conclusions.
A subscription billing provider can rapidly deliver a customized, responsive customer experience — including design (fonts, colors, etc.), build-out and quality assessment. The QA period will be considerably shorter because your provider has market research (derived from working with multiple clients) on which configurations will attract and retain subscribers in each region.
Salaries of developers
$70,000-85,000 per hire
A development team dedicated to everyday subscription commerce tasks
Integration expertise for consolidating customer data from your CRM, ERP, email platform and other business tools
Developer Resource Management
Will developers who are always busy with subscription billing tasks have time to work on advancing your core service? It's not likely, and your business could end up in the unfortunate position of having to delay improvements to your offering because subscription billing takes up too much bandwidth.
Integration with Existing Business Systems
Consolidating customer data from your CRM, ERP, email platform and web analytics with your subscription billing solution is necessary to get a holistic look at your business performance — but it's a complex development effort.
Order Processing & Fulfillment
Once a customer submits their payment and subscribes, all of this happens in a flash: 1) saving customer information, 2) scanning for fraud, 3) checking export compliance, 4) processing payment and 5) displaying and sending a confirmation. The longer this takes, the higher the risk that your customer will cancel or refresh (which means you'll have to refund duplicate orders).
Transmitting Customer Data
There are serious risks with transmitting customer data between platforms, and your development team needs to know how to comply with ever-changing global privacy regulations. For example, do you support social sharing? If so, you should know that in August 2011, the European Data Protection Supervisor (EDPS) mandated the removal of post-purchase social sharing for online purchases in the EU. What increases recurring revenue in the US can actually cost your business 50,000€ in Europe!
Expansion into New Markets
In order to grow your business, you need development resources focused not only on your current subscription commerce efforts but also on global expansion. Each new market has its own set of regional specifications that require custom development.
In additon to freeing up developers to work on your core offering, a subscription billing provider can achieve full integration in a matter of weeks, rapidly accelerating your time-to-market. They will also process orders in under two seconds (providing a positive customer experience) and securely transmit data in accordance with global privacy regulations.
Salaries of accountants and payment processing experts
$45,000-60,000 per hire
Advanced reporting and analytics engine
Merchant of Record (MoR)
Managing relationships with payment processors, submitting associated credit card fees and handling other administrative tasks around processing online transactions all have legal implications that, by default, fall on your business's plate — and not all vendors will assume responsibility on your behalf as your merchant of record (MoR). To avoid significant fines, you need to comply with PCI DSS standards and calculate, collect and remit taxes to relevant authorities.
Currencies & Payment Methods
To sell effectively in any market, you need to support your customers' preferred currencies and payment methods (while not displaying any that are unexpected or irrelevant, which can call the legitimacy of your site into question).
Relationships with Merchant Banks & Payment Service Providers (PSPs)
Negotiating and maintaining relationships with multiple entities can get complicated and expensive. And unlike a subscription billing provider that has already has these relationships in place, you'll need to build yours from scratch.
Country-Specific Payment Legislation
Some countries have passed laws that prevent money from leaving (for example, in Brazil, your business can't accept Brazilian real unless you have a processor and entity located within the country). If your legal business address is located anywhere governed by EU legislation, you are required to display an order confirmation page for your customers before they complete checkout. Because this is yet another opportunity for your European customers to abandon their cart, being aware of this page and optimizing it is critical for maximizing revenue.
There are many complexities and risks involved in managing currency exchange — and calculating exchange rates for different regions is just the beginning. A price that hits one region in the right spot might be prohibitively high for another. In order to optimize your pricing, you need the right market data. Even then, you run the risk of just "translating" pricing and displaying a price that doesn't resonate with your market (like 23.67€, for example).
A subscription commerce provider that acts as your merchant of record will manage your relationships with multiple merchant banks and PSPs as well as record and reconcile all of your transaction data. And because your provider has multiple clients, their transaction volume is much higher than yours — this means your business benefits from lower fees from PSPs. They'll also support a plethora of regional payment methods and currencies, which you'll require in order to optimize pricing for new markets.
Salaries of taxation experts
$40,000-55,000 per hire
Value-Added Tax (VAT)
The European Union (EU) first started charging VAT on digital transactions that occur within the EU in 2003. Since then, VAT structure and standards have been continually evolving, and companies often have a hard time staying compliant. For example, prior to 2015, VAT assessment was based on where your business was located; now VAT rate is contingent on destination (that is, where your customer is located). If you have customers in the EU, it's critical that you understand and comply with VAT regulations by collecting and remitting tax to the proper authorities. By not complying, intentionally or otherwise, you risk major fines. Your global revenue will take a hit, too, since prices without VAT factored in are not properly optimized for profit.
Tax Laws Based on Subscription Type
There are different tax implications depending on the type of subscription being sold (physical, digital, on premise software, etc.). Logic for calculating this kind of tax needs to be built into your subscription billing platform.
Regional Tax Laws
Tax laws vary from region to region and are subject to change. For instance, a new set of regulations in South Korea states that electronic services sold to South Korean customers are subject to a VAT of 10%. Laws like this go into effect immediately, and it's mandatory that your business complies.
In the United States, tax must be collected on all taxable sales, and tax rates vary from state-to-state. Collecting sales tax can be an enormous chore for online businesses because any customer in any state can conceivably purchase anything online. Sure, you can apply for individual seller's permits in each state, calculate state tax on a per-customer basis and keep track of tax you collect — but that will take up significant internal resources.
Staying up-to-date on changes to global sales tax and VAT regulations is a task in and of itself; calculating and remitting tax correctly is another. But you can rely on your subscription billing provider for both. Also, they'll automatically factor your customer's location and your company's tax nexus into every transaction, and maximize recurring revenue in each region through optimized pricing.
Salaries of compliance personnel
$100,000-150,000 per hire
Ongoing education for agents, since compliance regulations are constantly being updated
PCI DSS compliance costs, as estimated by Gartner for level 1 merchants (processing in excess of 6 million transactions of a single card type per year):
Payment Card Industry Data Security Standard (PCI DSS)
Strict PCI DSS compliance is required for any business accepting credit card payments. Recurring auditing fees hinge on a variety of factors — company size, number of transactions processed annually, existing infrastructure, credit card data scope, etc. — and initial implementation is quite costly. Fines for non-compliance, however, can be catastrophic for your business: up to $90 fine per cardholder data compromised, suspension of credit card acceptance, loss of brand reputation, the cost of a PCI Qualified Forensic Investigator ($130-200 per hour for a one to two year project) and much, much more. Additionally, PCI DSS compliant infrastructure, processes and scope are updated at least every two years, so you can't rest on your laurels.
Privacy Laws for International Sales & Data Transfer
Applicable privacy laws are another serious consideration. Because laws, regulations, standards and best practices around this are continually changing, they require constant monitoring. Your business needs to respond immediately to any sudden changes that impact business practices, like Canada's recent Anti-SPAM legislation (for which violators face penalties up to $10M).
Global Trade Compliance Regulations
These are constantly being updated, so you need to stay abreast of any countries in which an embargo or other specific trade rules apply. Without screening and escalation processes in place for identifying embargoed countries and individuals or organizations on the Specially Designated Nationals and Blocked Persons (SDN) watch list, you run the risk of non-compliance with U.S. export regulations (which can lead to 10 to 30 years of imprisonment and fines between $50,000 and $10,000,000).
European Privacy Laws
Even United States-based companies have to think about European privacy laws when engaging with European customers: European law requires an adequate level of data protection when collecting, processing or storing customer data from European citizens. The German Federal Data Protection Act (FDPA) fines your business up to 300.000€ per violation. Not complying with the European General Data Protection Regulation (GDPR) in 2017 may audit a fine up to 1,000,000€ (or up to 5% of the annual worldwide turnover, whichever is greater).
Data Breach Notification Laws
In the United States, these laws vary by state. Some states simply provide a maximum civil penalty per breach; other states calculate the penalty based on the number of customers affected. Under Michigan's statute, a business that knowingly fails to provide the required notice to a customer is fined up to $250 per failure (with a maximum fine of $750,000).
Channel Partner Compliance
If you do business with channel partners (affiliates, resellers, etc.), you must actively screen them to make sure they're also maintaining compliance with global standards.
Updating Security Infrastructure
Active maintenance of network security infrastructure is also required — for example, outdated versions of a firewall operating system may no longer be compliant.
In the unlikely event of a security breach, litigators can claim negligence if it is determined that your business violated compliance standards. A subscription billing provider will protect the personal information of your customers and react immediately to any sudden changes in legislation. Additionally, they will keep you in line with global trade compliance regulations, ensuring that you don't conduct business in embargoed countries.
Salaries of IT staff
$73,000-150,000 per hire (much higher for executives)
Purchasing or leasing necessary hardware
Renting/owning multiple data center spaces and equipment
Security officers for guarding physical datacenters
Robust safeguards for encrypting customer information
Reliability & Accessibility
An unreliable, inaccessible website or offering results in a poor customer experience, which inevitably impacts revenue. In addition to having exceptional uptime, you also need advanced Denial of Service (DoS) prevention measures in place so that your website isn't taken down by cyber-criminals who want to compromise your availability to customers.
If your data doesn't exist in three different places, it doesn't exist — period. You need overall infrastructure and component redundancy to maintain availability, because every second of downtime results in lost revenue for your business. Physical redundancy is also required, meaning you need multiple physical data center locations.
Load Times & Site Speed
Your server capacity needs to be maximized for checkout delivery and transaction data retention. Additionally, you must strictly monitor performance so that load times are speedy and latency doesn't discourage customers from signing up or subscribing.
In order to remain efficient, a subscription billing system must be continuously updated, both in terms of hardware and software. Highly-trained IT staff will maintain your network components, but hiring these experts internally is costly.
Collecting Customer Information
Companies that collect customer information and payment details must have multiple segregated networks and need to run daily PCI scans to ensure data security. State-of-the-art encryption layers provide an additional layer of protection: a key is required to decrypt information from each session.
To be a highly available and scalable company, you need to stick to rigorous network security and compliance standards — and have impenetrable systems in place to protect your customers' information as it is collected and transferred. A subscription billing provider will perform all of this, along with requisite daily PCI scans. Additionally, any provider worth its salt is guaranteed to have exceptional uptime, including maintenance and upgrade periods, and is integrated with global Content Delivery Networks for rapid load times.
Salaries of product managers
$95,000-110,000 per hire
Sophisticated data analysis tools that identify optimization opportunities
"My Account" functionality for customer self-service
Integrated marketing platform for sending customer communications
When you think about integration, consider this: it's like building a house. Getting two windows, a door and a stack of bricks delivered is a piece of cake — drawing up the plans is the hardest part. Blueprinting a subscription program that provides a seamless customer experience, eliminates barriers to sign-up and maximizes renewals involves various (expensive and involved) integrations, all of which fall on the shoulders of your in-house developers.
Updating Plan Details on Your Website
Do you have a process in place for updating plan details or adding new offerings to your catalog? If yes, does it map your changes to your customer interface in real-time, or is that a separate step that involves your design and development teams?
Customer Lifecycle Management
The success of your subscription business depends on how well you can build long-term customer relationships. To nurture, acquire and retain subscribers, you need to be able to manage all touchpoints in the customer lifecycle — from converting free users to managing renewals, supporting upgrades or downgrades, offering promotions and executing winback strategies.
Managing Billing & Renewals
Billing complexities are par for the course with a subscription offering: you need to know when to bill each subscriber, for how much and via which payment method, in addition to collecting payments on time and securely storing customer information. Complex payment situations like prorated and partial term billing are difficult to support in-house, as are term, tiered and usage-based subscriptions. And what if you want to use a combination of the above?
The key to building long-term relationships with customers is to send them the right message exactly when they need to see it. To accomplish this, you need to integrate a marketing automation tool with your subscription billing solution so you can send relevant, customized messages via email, in-app notifications, SMS and more.
Unified Plan IDs
You need to be able to manage global subscription details from a single plan ID, else you risk wasting your team's time and resources every time something changes. Can you imagine selling in 50 markets and having to update 50 different plan descriptions — or manage a one-plan promotion across 50 items in your catalog?
Empowering your customers to manage their personal date and plan information through â€śMy Accountâ€ť functionality dramatically reduces contact rates while increasing retention and overall satisfaction. Setting up this interface on your own can be a costly undertaking.
Advanced Reporting & Analytics
You need a built-in reporting and analytics tool that you can use to access the up-to-date insights into all aspects of your subscription business, like retention rates, churn, acquisition and more. You can find one and integrate it, but that's more work on your end.
By partnering with a subscription billing provider, you'll reduce the complexities of recurring billing, upgrades and downgrades, payment methods changes and other subscription scenarios so you can focus on building long-term customer relationships. They'll consolidate customer data from various sources (like your CRM, web forms, tracking tools, license management system and email platform) so you can get real-time insights into your overall subscription program. Also, your provider's baked-in reporting and analytics tools will help you identify key opportunities for improvement and optimization.
Salaries of fraud analysts
$40,000-55,000 per hire
Fraud prevention technology that identifies and responds to fraud patterns
Ongoing training and education for fraud prevention personnel
An effective fraud prevention system is critical to the success of your business: it protects your subscription offering, your brand reputation and your bottom line. Fraud prevention technology that isn't keeping up with fraud trends can harm your business more than it helps by permitting invalid transactions and holding legitimate orders in manual review.
A dedicated fraud prevention team identifies revenue opportunities by updating their procedures to correctly qualify valid orders up-front. Unnecessarily high order rejection rates translate to lost revenue.
Trained Fraud Analysts
Top-of-the-line software isn't enough — you also need to hire and train fraud analysts. These analysts will manually review each flagged order, continually update fraud detection algorithms and identify fraud trends that are specific to your business.
A chargeback occurs when a customer who has paid you for something disputes that payment directly with their bank (instead of initiating a refund or cancelation with your business). Poor fraud detection can result in a high chargeback rate, which results in paying fees and potentially higher intercharge rates with merchant banks. A merchant bank might even stop processing your payments altogether if your chargeback rate exceeds a certain level.
Fraud prevention technology from a top-of-the-line subscription billing provider leverages massive amounts of behavioral data to detect fraud, effectively eliminating human bias. Their highly-trained fraud prevention team will process your orders more efficiently, reduce false positives, increase revenue and provide a secure, reassuring customer experience.
Salaries of customer support representatives
$28,000-43,000 per hire
Training resources for getting representatives up to speed
Ticketing and phone systems for your customer contact center
Accessible Customer Support
As your expand your business into new markets, you need to provide high-quality phone and email support in a variety of languages and time zones. Support that isn't available when your customers need it can result in higher churn, degradation of your brand and missed revenue opportunities.
Reporting & Analytics
Customer support issues must be tracked in order to lower contact-to-order (CTO) rates. Doing so may require specialized software that your business needs to invest time and resources in finding, installing and learning how to use. You also need analysts who can deliver regular reports on customer support KPIs.
Your customer support team must use rigorous internal and external quality control measures to gauge customer satisfaction. Without this data, you'll be at a loss for how to improve procedures for communicating with customers and resolving their issues.
Historically, customer support is a field with high turnover, so you need internal resources dedicated to onboarding and training new representatives. Your trainers will develop and communicate standardized customer support procedures while keeping your team up to speed on industry best practices.
When a customer gets frustrated with accessing or using your offering, they might default to throwing up their hands and trying to cancel. It's up to your customer support team to de-escalate these situations and mitigate refunds. You need to educate your representatives in how to retain customers by explaining unknown charges, renewing or canceling subscriptions, making referrals to technical support resources, etc.
Some subscription billing providers offer a multilingual team of representatives accessible around the clock and around the globe. They'll resolve all ordered-related issues on your behalf, driving repeat business, increasing customer satisfaction and improving your global brand value. Importantly, you can define your own policies and procedures and your provider will make sure they're executed consistently. They will also deliver reports and make recommendations for improvement.
Other Perks of Working with a Subscription Billing Provider
One of the most valuable services that a subscription billing provider offers is ongoing consultative expertise. They'll act as an extension of your team, working with you to optimize your subscription program, expand your market reach, drive recurring revenue and build long-term customer relationships.
Years of Experience
Because a subscription billing provider works with many clients to deliver customized solutions to complex problems, they have the experience required to move quickly and make informed decisions. This is a major benefit — instead of reinventing the wheel for your business, they can rapidly implement processes and features proven to help you succeed.
No Need to Evaluate Third-Party Vendors
Subscription programs are complex, and anything you can't manage in-house will need to be handled by a third-party service provider. Identifying, vetting and testing point solutions in today's cloud-based market — where there's a seemingly endless amount of providers to choose from — is time-consuming and research intensive. Does it really make sense to go through all the work of cobbling together third-party vendors when the resulting solution might still not meet your needs?
All This & More (Revenue)
On top of offloading internal operations and reducing processing costs, utilizing a subscription billing provider actually creates revenue opportunities for your business. You might not have the internal resources required to expand into new markets, comply with global data privacy regulations and prevent fraud while continually nurturing long-term customer relationships — but an experienced provider can help with all of that and more.