In 2020, subscription billing and management was a $6.03 billion industry, according to Zion Market Research. And that revenue is expected to skyrocket, reaching more than $15 billion by 2028 at an annual growth rate of more than 15 percent.

What’s driving that incredible growth? In short, customer retention. The stakes are higher than ever for companies looking to stay relevant and keep customers coming back in the face of rapid change. As subscription models have moved from a “nice to have” to a “must have” for companies in just about every industry, legacy billing systems have begun lagging, and the need for sophisticated subscription management systems as grown, as well. Here are five drivers of that need:

Growth of Subscription Models

In the subscription world, the most dramatic growth of the last few years has been in the media and entertainment vertical. While this trend was already going strong pre-pandemic, shuttered movie theaters had viewers looking for alternative sources of entertainment while studios looked for new ways to release their films. Now, from TV and movies to music, podcasts, and news, media and entertainment are driving a significant portion of subscription model demand.

Of course, this isn’t the only industry in which subscription models are taking off. The subscription obsession didn’t start with the pandemic (research shows that, from about 2002 to 2021, the subscription economy grew more than 435%), but the pandemic certainly accelerated that growth. Consumers fully embraced the convenience of subscription services to deliver everything from groceries and other necessities to clothing, hobbies, and more. Even now that in-person shopping has opened back up, many businesses are still successfully reaching customers through these recurring models. Research shows, in fact, that by 2023, as many as 75 percent of direct-to-consumer brands will offer subscriptions—and subscription and billing management software are empowering them to grow these initiatives.

Customer Focus on Value

Another trend that has grown exponentially is customers’ focus on value. The economic turmoil of the last few years had many households uncertain about their financial situations, and inflation has led to additional budget tightening. As a result, it has become more important than ever for consumers to be able to purchase—and pay for—only what they want and will use. This bolstered the demand for subscription models as folks searched for cost savings through product-as-a-service offerings. But it also increased the demand for pay-per-use and other usage-based alternatives to simple subscriptions. Under these models, customers can tailor their purchases so they’re getting only what they need, when they need it.

We illustrated this concept in a recent post with the example of a gym membership: Under the basic subscription model, you’re paying $65 or more per month whether you’re using the gym consistently or not. So when your circumstances change one month and you find yourself skipping more days than not, the “cost-per-workout” calculation starts to make the subscription feel unjustified. But what if, rather than paying $65 per month no matter what, you could pay only for what you need? The charges could be per day or per piece of equipment used, by the minute or by the rep. Regardless of how it’s calculated, you’re only paying when you’re working out. This ensures customers are getting maximum value out of their purchases. And for businesses, the lowered cost of entry entices customers to stick around, even through change. However, the complexity of these more flexible models—with payment structures varying from customer to customer—inevitably requires more intricate billing capabilities than most legacy systems can provide. As a result, savvy companies are turning to sophisticated subscription billing and management platforms to meet customer demands.

Market Demand for Agility & Flexibility

In an environment where the only certainty is change, businesses that want to succeed have to be agile enough to pivot on a dime. Historically, progressive businesses—the businesses that want to get ahead—are constantly evolving their business models in order to increase revenue, build and strengthen their customer bases, and grow their market share. And that’s especially true in today’s uncertain economy; for many companies, innovation is no longer about growth but about survival.

However, the impact of even the most innovative business models and offerings are limited by one key criteria: whether the business has laid the foundation for agility with a billing system that can quickly and efficiently roll out these new products, services, and pricing models. Manual processes, excel spreadsheets, and outdated billing systems are now a true liability as they cause costly errors and delays. Subscription billing and management software, on the other hand, allows businesses to automate their most time-consuming processes and configure new business models quickly and efficiently, easily keeping up with whatever the market throws at them.

Customer Retention

Reducing churn and retaining customers for the long haul is critical, and it’s now more difficult than ever as customers are taking a careful look at where their money is going—and where their value is coming from. While flexible business models go a long way in keeping customers coming back for more, it’s also important to ensure a frictionless billing experience with every customer transaction. This means timely invoices that are easy to interpret, clearly spell out every charge for customers, and make payments simple. But it’s more than that, too. Businesses must be able to identify the behaviors that may hint at upcoming churn and take action to reengage and retain customers. This requires sophisticated, real-time insights into usage patterns, along with workflows designed to reengage and reinvigorate “drifting” customers before they disappear altogether.

Billing is a key component of the customer experience, and a confusing or irritating process is liable to drive customers away, but a proactive retention strategy can keep them fully invested in the brand. By reducing friction, minimizing disputes, and offering value at every turn, businesses can ensure customers walk away from every transaction pleased with their service and eager to buy again from the same brand. Here again, outdated processes hinder customer retention efforts, and savvy companies are seeking sophisticated billing systems designed to increase customer lifetime value. Through sophisticated customer behavior analysis, these systems can not only reduce churn but also identify new opportunities to pitch to existing customers.

Data Security & Regulatory Compliance

Finally, while the conversation around data privacy is not new, it has risen in intensity in recent years as businesses are collecting higher volumes of customer data and using it in more ways than ever before. Increasing customer pressure to keep data safe—and increasing regulations designed to do the same—have meant businesses are facing increased onus to comply with both ethically and legally mandated best practices for data security. While responsibility ultimately falls on individual businesses, subscription and billing management platforms can offer built-in measures and characteristics designed to play a powerful role in relieving the compliance burden.

For many businesses, sophisticated billing management is unfamiliar or uncharted territory. But as these trends continue to accelerate, the right subscription and billing management platform will no longer be a convenience—it will be a must-have for companies that want to retain customers and meet their growth projections. The Gotransverse platform is designed to do all that and more. To learn more, we invite you to take a virtual tour today. If you like what you see, request a demo to talk with one of our experts about whether Gotransverse is the right billing platform for your organization.