Recurring revenue over one-time sales
Nowadays, we observe an increasing success of subscription-based businesses. What leads to such situation? There is a number of benefits for both companies which offer their products or services in a subscription manner, and their customers.
“The more guaranteed revenue you can offer a potential acquirer, the more valuable your business is going to be”
That’s why more companies are jumping into subscription space, offering their products or services as a monthly or annually paid subscriptions. In today’s world, watching films, listening to music, having your data synced with the cloud, and paying a recurring monthly fee for it is not surprising for us. Moreover, if you are an IT guy like me and you have worked with many SaaS cloud services, you probably got used to subscriptions and pricing plans. But, surprisingly, not only SaaS can be sold in subscription-based model. There are planty of products, and imagine women can subscribe for the right products at the right time, and men can order razors and other personal grooming products.
On the other hand, the extra value for the customers lies in the convenience. As a customer, I don’t have to remember to reorder every month. Everything is delivered to me on time, and I don’t have to go shopping or visit a website. Last - but not least - it helps me stay within my budget.
Subscription and billing platforms
For merchants interested for launching their own subscription-based products, there are at least few subscription-solution providers. Some of them are good for small companies - like Chargify or Recurly, but if you need a scalable enterprise-level solution, you should take a look on Zuora. It provides you customer subscription model, and apart from that, brings you a tax automation and compliance, multi-currency support, and customer metrics.
Within this article I would like to model a simple use case in Zuora, and describe/explain the most important features it provides.
Modelling a pricing plan with zuora
In Zuora, you have one product catalog which you can use to define the products your company sells and the pricing for those products. Inside the product catalog you can place as many as you want:
Products - represents a single product or service your company wants to sells.
Product Rate Plans - represents a collection of all variants that your customers may incur when buying your product. One Product Rate Plan can contains many charges.
Product Rate Plan Charges - represents a single variant that your customers may incur when buying your product. One Product Rate Plan can contains many charge models. There are three types of charges:
Charge Models - determines how the charge is calculated. Zuora supports variety of charge models, including Flat Fee, Per Unit, Volume, Tiered, Overage, and Discount.
Designing a Custom Product Catalog
API-call Fee (Usage charge): 500 API-calls included, 0.50 EUR/100 API-calls thereafter
API-call Fee (Usage charge): 5000 API-calls included, 0.45 EUR/100 API-calls thereafter
API-call Fee (Usage charge): 10 000 API-calls included, 0.40 EUR/100 API-calls thereafter
In order to model our use case in Zuora, we would need to create three different products under product catalog.
1. Creating Basic Product
Adding new products is easy: simply specify the name and the description of the product, and define the start- and end-dates indicating when your product is valid / available.
2. Creating Product Rate Plans under Basic Product
As a next step, we create three separate Product Rate Plans for monthly, quarterly and annual payments.
3. Creating Product Rate Plan Charges under every Product Rate Plan
At the end we create three different charges (one-time, recurring and usage charges) for each Product Rate Plan.
3.1. Creating One-Time Charge
3.2. Creating Recurring Charge
3.3. Creating Usage Charge
Now repeat steps 3.1. to 3.3. in order to create quarterly and annual Product Rate Plans, adjusting the prices and limits accordingly to your pricing plan.
The section Timing of Charge allows you to customize the way you charge your accounts:
Trigger Condition - specify when subscribers will start being billed for this charge.
End Date - specify when subscribers will start being billed for this charge.
Billing Period - specify the recurring frequency of this charge.
Billing Timing - specify when to charge the billing period fee.
Billing Day - the day of the month that the customer is billed.
Billing Period Alignment - for periods greater than a month, this field controls how billing periods should be aligned.
At the end, the Basic Product should look similar to the one below.
Repeating the instructions from the previous exercise, launch the Premium and Enterprise products. Remember to remove all usage charges for the monthly, quarterly, and annual pricing plans, as our pricing plan offers unlimited storage for the Enterprise product at no charge.
After launching all your three products, you should establish the connection between your product and Zuora, in order to create the accounts and subscription in zuora. You have two options in order to do that:
Integrate with REST or SOAP API,
Use Zuora’s checkout pages - built in, easily embedded and customized with your company's visual style and a variety of functional option.
It's a very broad topic in the sense that you have to pick which actions you need to support in zuora (creating accounts, subscriptions, tracking profile updates, upgrading/downgrading subscriptions, cancelling, etc.) and have them wired into your system / app / CRM / e-commerce platform.
At this point you should have your subscriptions tracked by zuora, which in turn helps you do the numbers and invoices properly. It's the most basic scenario one can imagine, and even though there are many possibilities and moving parts out there (most of them being finance-specific), you should be able to fairly easily have it configured by yourself together with your finance and software teammates.
Wait, there is more!
Obviously, we've only scratched the surface here. In the next steps you'd want to have your payments automated with payment gateways or payment method pages, in order to send payment details to your company in a secure manner. Then, automated emails' templates, invoice templates, multi-currencies, and other finance-specific options, probably a CRM integration, and much more. I didn't mention data migrations for running systems, did I?
To give you a brief overview on the features, apart from subscription and billing management Zuora offers you:
Z-Finance module, which enables to you use Zuora as a general ledger and sub-ledger for your subscription revenue.
Reporting module, that provides a view into the financial and operational health of your business.
We have successfully integrated zuora in a live system with hundreds of thousand active subscribers and sophisticated pricing plans. We are happy to share our experience, so feel free to drop us a line at firstname.lastname@example.org.
Marcin Róg, full-stack developer, e-commerce consultant @ rspective
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