What is recurring billing, and who is it for?

Recurring billing is a payment model where businesses charge their customers a set fee at prearranged intervals for products or services. It is an essential process for subscription businesses. These payments can be established on any billing schedule—weekly, monthly, annually, or on a custom schedule. Companies that utilize recurring billing include subscription box services, SaaS companies, utility companies, businesses selling memberships (including gyms and streaming services), and publications (including newspapers and magazines). 

What are the benefits of this payment model?

The recurring billing model has a number of benefits for both businesses and consumers. Its convenience is a major benefit for both sides, as merchants automate these payments and shoppers only have to provide their credit card or other payment information once during signup, creating a more seamless customer experience. For the company, subscriptions provide consistent cash flow and make for easier and more accurate revenue forecasting. 

Any subscription business should be aware of the risk of billing errors, which may occur when credit cards become out-of-date over time. Strategies like dunning—payment retries and strategic communication around this with your customer base—can help mitigate the effects of this, improving customer retention. Strong security measures and PCI compliance are also crucial for businesses handling recurring payments.

What is subscribe-and-save?

Subscribe-and-save (also called the replenishment model) is a subscription business model where merchants offer the same products on a recurring basis, often for a discount on product pricing and/or shipping. 

Typically, this type of subscription is geared toward daily consumable products, such as dog food and dog treats, household goods, coffee, personal care items like diapers and toothpaste, and certain food items or snacks. In addition to the discounted nature of the product, replenishment subscriptions are also appealing for customers for their convenience, delivering commodity items on a recurring basis. 

Replenishment subscription options can be offered alongside one-time purchase options (as seen in Amazon’s product detail pages), or offered as physical subscription boxes.

What are recurring payments?

Recurring payments (also referred to as subscription payments, subscription billing, recurring billing, and automatic payments) are a key aspect of subscription commerce involving payments for goods or services that repeat on a set cadence. Up front, merchants or retailers must get customers’ permission to automatically charge their credit card or deduct payments from their bank account in exchange for the agreed-upon goods or services. The merchant will then continue deducting the recurring payment amount on the due date until the customer cancels the service. 

Examples of recurring payments include subscription box services, magazine subscriptions, automated student loan payments, and SaaS. 

What are the benefits of subscription billing?

On the merchant side, recurring payments offer consistent income, empowering more accurate forecasting and predictable revenue. This business model also offers the ability to track customer behavior over time and provides multiple touchpoints for communicating with customers, helping brands build an engaged community of subscribers. Finally, recurring payments offer merchants the opportunity to increase customer lifetime value and average order value.

Recharge’s subscription payments solution takes the guesswork out of launching and managing recurring subscriptions for your brand. Customize your payment schedule, skip or reschedule deliveries, offer cross-sells and one-time purchases alongside subscriptions, and notify customers of upcoming deliveries and shipping information.

What is a subscription box?

A subscription box is a group of physical products packaged in a box and delivered to customers on a regular, recurring schedule. Today, the subscription box industry is experiencing enormous growth, and shoppers can find subscription boxes with everything from beauty products to home goods to flower delivery services to snacks from around the world.

What are curation and replenishment subscription boxes?

In curation subscriptions, merchants curate a box of one or more products, typically organized around a certain theme. For example, beauty subscription boxes often offer a curated selection of makeup and skincare items that vary with each delivery to bring surprise and joy to subscribers. In replenishment subscriptions (also known as “subscribe-and-save”), the same items are shipped to the customer on a recurring schedule, often for a discounted price. For example, a coffee subscription could offer a monthly box filled with a customer’s preferred coffee beans, with a 15% discount for the customer. Though monthly subscription services are common, a subscription box service can deliver on any cadence.

Why choose subscription boxes?

A subscription service can offer many benefits for both customers and merchants. For customers, the list of benefits can include convenience, novelty, and affordability. On the merchant side, there are many benefits, including predictable revenue on a set cadence due to the recurring nature of the product. Subscription services also have the opportunity to create a community of engaged subscription members, which can increase brand loyalty, awareness, and trust.