Maybe we had you at “the new black of Internet marketing.” After reading our blog post “The Rise Of Subscription Billing In Marketing & Digital Agencies,” many digital agencies loved the benefits of subscription billing but they still had questions about how to transition from their current project-based billing to a subscription business model.
So, we decided to go straight to the source — ad and marketing agencies who are already rocking subscription business models. We asked leaders of those agencies, “What is the #1 tip you would give to agencies for transitioning to subscription-billing (from hourly or project-based billing)?”
As the responses came in, one thing that came through loud and clear is how beneficial their subscription-based business model is for their clients. It absolutely has numerous benefits for the agency (or else they wouldn’t be using it) but it was also obvious these agencies had their clients’ best interests in mind when selecting their business models.
My #1 tip to handle the transition process is to make sure to really convey the value to your clients as opposed to the amount of work, time and headache it’s saving your agency. Let your clients know that subscription billing allows for more creative and dynamic projects, unbound by some of the unforgiving constraints of hourly / project based billing. Your clients should feel that the step is being made to further the agency / client relationship in a positive way, and while it may take some time to adjust, you believe that the quality of your work and the value your company brings to the client will ultimately improve significantly.
The number one tip I would give to clients looking to move from project-based billing to subscription billing would be to position their organization’s billing structure as an alignment of interests with their clients.
- Subscription billing helps an agency to plan with a big-picture view, but adapt to a changing environment.
- Subscription billing helps an agency better correlate their client’s spend with trackable successes.
- Subscription billing helps an agency attract and retain talent that’s put to work for their clients.
Only billing by project encourages agencies to come up with projects independent of the result – it’s a sales-based approach instead of a results-based approach. Good for the agency in the short term, but not good for their clients (or themselves, long term).
Be transparent with your pricing! We’re extremely transparent with our pricing and try to make the signup process super easy and clear for customers. Our @BlogMutt customers are busy, so if we can make it easy for them to get blog posts faster and easier without having to worry about the flux of content costs, great!
The reason we originally did a subscription service was due to the fact that blogging requires an ongoing, concerted effort. If we just offered the ability to take one-off posts ad hoc, most people would get one, and not feel compelled to keep going. Subscriptions were a way to get people in the habit of blogging on a regular schedule.
The subscription model makes our customers lives easier. Now, customers don’t have to agonize over the cost of varying freelancer rates. They can come to BlogMutt and pay the same price, month-over-month, for blog writing services. And they can always unsubscribe. There are no contracts.
And because we know our churn rate, we can also anticipate our monthly recurring revenues through a subscription service.
The #1 tip I would give to agencies when transitioning to subscription-billing is to start small and slow. A sudden change in billing can cause friction between you and your client. Allow them to get used to the change by starting with small projects that can be billed consistently on a monthly basis. This will allow clients to get used to ongoing subscription billing to allow for a smooth transition of bigger projects.
Founder & CEO
Use a recurring billing solution — don’t try to build out the billing yourself. For us, the automated billing that Chargify provides allows us to reduce our overhead by not needing a full-blown accounting department, and reducing our A/R tremendously by getting paid within 24 hours of the card transaction. If you look at it, the 2-4% you pay in [payment gateway] fees outweighs waiting for an invoice to get paid. We’ve all heard “the check is in the mail” story so many times before.
I find that most clients (regardless of age or even size) are willing to pay by credit card these days. I’d rather get paid within 24 hours of the charge (or invoice) as opposed to 30 or 45 days later.
Vice President, Marketing & Digital Media
My tip is: Set up service packages with an auto renew feature. Consider setting up levels of packages for each area you work in. For example, we have packages for social media, SEO and video production. In each area we then have the levels “basic”, “pro” and “premium” (similar to “bronze”, “silver” and “gold”.) We then charge a set monthly fee for each type of package depending on the level the client selects. For example, our “pro” social media package or our “basic” video production package.
Set up your contracts to auto renew after a certain amount of time. This is the model used by the cell phone and cable companies so we are now used to it and accept it. In our case, we typically sign a client up for a minimum of six months then their packages renew automatically month-to-month thereafter. This removes many headaches associated with renewals.
Finally set up your monthly billing in a system like Chargify and have your clients pay you automatically every month without needing to think about it!
Thank you to everyone who took the time to respond to our question!
Still have questions about how to transition your marketing or ad agency to recurring revenue? Leave your questions in the comments section below.
If you’re a similar agency who is already enjoying the benefits of a subscription billing model, please share your #1 tip for fellow agencies looking to move away from project-based billing in the comments below.