what is agility in pricing & what are the implications for your billing system?
DESCRIPTION
Dealing with changes in pricing is a significant challenge in any business. Pricing plans and paradigms proliferate, while individual customers require specific charges and adjustments to their accounts. The result? Vast lists of SKUs, ordering complexity, and confusion. A subscription billing system provides agility by structuring pricing catalogs to minimize the proliferation of products, plans and variations, and automated tools for dealing with common customer service issues. There are three key needs: - Flexible product catalogs - Multi-level pricing. - Customer specific overridesTRANSCRIPT
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What is Agility in Pricing?And why does it matter?
February 23, 2013
Steve Adams
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• Pricing in the real world – B2C and B2B examples– Coping with rapid changes– Complexities of Subscriptions
• Agility
• Reinventing Billing
• How Fusebill can help – Quick Demonstration
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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
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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
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The expanding Subscription World
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Everything is easy when you start – B2C example
Voice $10/m
Data $20/m
40GB $40/m
Basic Phone $200
Smart Phone $500
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And then it’s not so simple
Voice $10/m
Data $20/m
40GB $40/m
Basic Phone $200
Smart Phone $500
96 combinations of products, term
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Then there’s some bundling…
Voice $10/m
Data $20/m
40GB $40/m
Basic Phone $200
Smart Phone $500
Voice $10/m
Data $20/m
$25
40GB $40/m
Voice $10/m
Data $20/m
$25
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Some incentives, some discounts….
Voice $10/m
Data $20/m
40GB $40/m
Basic Phone $200
Smart Phone $500
Voice $10/m
Data $20/m
$25/m
40GB $20m
Voice $10/m
Data $20/m
$25
Voice $10/m
Data $20/m
$300/year
Basic Phone
$0
Voice $10/m
Data $20/m
Basic Phone
$0 Smart Phone $200
$300/year
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And then we want to do price testing
Voice $10/m
Data $20/m
40GB $40/m
Basic Phone $200
Smart Phone $500
Voice $10/m
Data $20/m
$25/m
40GB $20m
Voice $10/m
Data $20/m
$25
Voice $10/m
Data $20/m
$300/year
Basic Phone
$0
Voice $10/m
Data $20/m
Basic Phone
$0 Smart Phone $200
$300/year
$18/m
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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?
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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
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Complexities of Bundling & Revenue Recognition
ActiveWin Integration
Services
Cash
EffortEarnRevenueMonthly
CollectQuarterly Delay Start
EarnRevenueMonthly
Ship & EarnRevenue
Collect
Subscription
Hardware
IntegrationServices
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Easy Solution?
• Custom tracking for every contract
• Proliferation of spreadsheets that are manually updated
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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?
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Agility helps with
• Accounting• Automation• Accuracy• Analytics
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Advertise
Web Visits
Conversions
$$$$$
Build Repeat Business
One Decision – multiple orders
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Transactional back office systems fail
18
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
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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
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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
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21
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
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Catalog – What, How, How Much
• Concepts– What?– How?– How Much?
• Catalog– Products– Plans (aka packages of products)
– Pricing
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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
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Plans
• Plans– What is it?
• Basic Plan – Setup Fee– Charge
• Products in Plans (optional)
– Package up multiple products
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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
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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
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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
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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
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Accounting
• Accurate Taxes
• Discounts, Write-offs
• Earned vs Deferred Revenues
• Cash vs Revenue
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Agility – cope with pricing changes• Pro rating
• Upgrade Options
• Variations
• Promotions / Coupons
• Customer lifecycle:– Cancel– Renew– Options
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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
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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 …
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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?
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Brief Walkthrough
Basic offering –Premium Plan –Options to purchase extra or upgrade