Posts Tagged ‘Best Practices’

What Does “Build Online Revenue” Mean Exactly?

Wednesday, October 26th, 2011

For a few years, Vindicia’s tagline has been sitting a quiet sentry duty. People read it, but it seems to me to be something they absorb without thinking – like those photos with surprise objects in them that everyone looks past. I wanted to stop a moment, take a step back, and explain what Build Online Revenue really means.

First, there is a very tactical answer to that question. Vindicia, since inception and even before we launched CashBox in 2008, was about creating a platform to enable digital merchants to increase their revenues. CashBox extends customer lives while bringing tools and efficiency to our client’s marketing team tasked with expanding the paying freemium or subscriber base.  We do this with our SaaS solution in conjunction with industry best practices.

At my previous company, I personally experienced how hard it was to manage through channel conflict, as physical became digital, while simultaneously dealing with piracy. Delivering software services that delight and allowing business teams to experiment is an essential part of what Vindicia brings to life. We continue to build on the ability to leverage data, both a client’s and our entire network of 120 million accounts and 80 million unique credit cards, to help clients explore the non intuitive world that involves marketing digital services directly to end users.

But there is something larger that Build Online Revenue means. It is an attempt to capture a conviction. I cut my teeth in a world surrounded by pundits exclaiming, “everything is going to be free, man!” Even the wizened opined that the only way to build successful internet businesses were to capture as many users as fast as you possibly could, getting paid be damned.

I don’t believe that. I believe that the advertising model has its place, but it isn’t the way the great intellectual works of human history get created. The services that will be critical to us, that will move us, that will inspire us and allow us to create – they’re going to cost money because they are worth every penny – even more than their public price. Vindicia wants to be the mechanism through which the next wave of digital creation creates wealth.

Vindicia wants to help the entire world Build Online Revenue.

Gene HoffmanTags: , , , , , ,
Posted by Gene Hoffman in Best Practices, CEO Blog | No Comments »

Rapid Growth and Even More Rapid Innovation

Tuesday, May 3rd, 2011

The good news is that we’re growing far faster than we anticipated and, for that, we have to thank our various clients, some of whom never heard the word recession. The better news is that we are introducing a whole set of product innovations that we believe will enable merchants selling digital content to even more rapidly generate benefits from SaaS billing.

Our latest release, announced today, is the first in a series that focuses on bringing the power of customer acquisition and retention to the “post-pay” world. What do we mean by that? A “pre-pay” model is one in which a customer pays in advance of the service being used or consumed. Vindicia CashBox has traditionally focused on this model and the markets that adopt it. The marketing and billing processes in a pre-pay model typically orient around “automatic payment” methods — credit cards, debit cards, pre-paid cards, and others. Conversely, a “post-pay” model is one in which customers pay after the service has been used. Businesses presenting invoices have often (though not always) fallen into the post-pay world.

The reality is that most companies dealing with invoicing have traditionally focused on automating the order-to-cash process, and specifically on minimizing days-sales-outstanding (DSO). That is absolutely a noteworthy pursuit and one that CashBox natively supports, but frankly misses the bigger picture around customer retention. After all, the benefit of reducing DSO by 10% can be completely offset by your customer retention % falling as well, and this effect is magnified if you are a subscription business.

We focus a lot of our time and effort in understanding how to optimize your customer retention efforts, independent of what business model your online service supports. It’s also why we can state unequivocally that we added more than $50 million to our clients’ top line in 2010. We look forward to reaching that $100 million mark soon.

Scale is another critical aspect of the billing process and one that Vindicia has focused on from our inception. We understand what it means to handle hundreds of thousands of transactions a day, support billing in various currencies across different payment methods, calculate necessary taxes across different global tax regimes, and communicating with end-users in their language of choice.

Whether your billing model supports subscriptions or microtransactions, invoices or automatic payments or both, or credit cards or electronic checks, you can be assured that CashBox will focus on optimizing your acquisition and retention efforts across a highly scalable SaaS billing infrastructure.

Sanjay SarathyTags: , , , , , , ,
Posted by Sanjay Sarathy in Best Practices, Vindicia Press Release | No Comments »

Payment Ecosystem Myths – Part 2

Wednesday, December 8th, 2010

In part 1 of this topic, we discussed common myths around chargebacks and the difficulties of being the merchant of record.  Here are some additional myths that we’d like to refute:

“The more payment methods, the better” – This revolves around the “bright, shiny object” theory. Companies are easily swayed by new payment methods and promises of better monetization, leading to a plethora of options available for customers. Studies have shown that three payment methods are optimal for most online purchases. More can be provided, but not on the initial purchase page; otherwise they’ll just confuse your customers.

Another way of looking at payment methods is to look at the margins, the customer dispute process, and the potential for cannibalization.  The most common payment methods in the US are still credit and debit cards. You’ll obviously need to modify this thinking based on the geographical focus for your service and the demographics of your audience, but implementing 10 payment methods is rarely profitable.

“Everyone pays with PayPal, that’s all I need” – PayPal is a very ubiquitous payment method, especially for digital goods. However, offering only PayPal for payments excludes a much broader market of potential buyers. The customer purchasing process for credit cards is much smoother outside of the PayPal flow. Your users should be incentivized to spread the word about your product, not sign-up for PayPal.

“The customer payment experience is less critical than new product features” – The customer’s purchasing experience is incredibly important and companies ignore it at their own peril. Companies like Zynga and Netflix are hugely successful and known for their optimized and customer-centric purchasing process as well as their products. Dedicated customers will find a way to pay despite the experience, but the broader population of customers will abandon purchases if the process seems too difficult or unsecured.

“I don’t need to worry about fraud” – Fraud is a reality for any company selling services and content online, especially digital goods. Companies that ignore fraud will soon find themselves in severe trouble with the card networks (and their payment processors).  The path to online success is littered with the stories of companies that were driven out of business by ignoring the fraud risk.

Read the final set of myths in part 3 of this series.

Sanjay SarathyTags: , , , ,
Posted by Sanjay Sarathy in Best Practices, Marketing Fury | 1 Comment »

Subscription Billing’s Opposing Forces

Monday, December 6th, 2010

When going to market using subscription billing there are three diametrically opposed forces fighting you, the person who owns the active subscriber count as you try to acquire and retain the most customers possible. These forces are PCI, Account Updater, and customer data ownership. I want to focus on the balancing act between the first two.

These days, one of the primary mechanisms (other than using something like HOA on CashBox) to lowering the compliance burden and the actual risk of card disclosures is to use tokenization of those cards from your merchant acquirer, or gateway. Tokenization is simply an infrastructure at, for example, your gateway that will take the card you obtain from your customer on your checkout page, encrypt it for storage in their database, and hand you back a ‘handle’ to that card for future use. It doesn’t remove much of the compliance burden as credit cards still flow through your webserver and thus you still have to fully comply with PCI, but it does lower the risks of actual disclosure and shrinks the scope of your compliance efforts.

A surprising number of merchants are unaware of or don’t implement Account Updater, which is available from Visa and Mastercard in North America and some of Europe (Visa’s overview.) Account Updater functions in two ways. The primary way will automatically send card changes for customers that you’ve billed in the last six months to you so that you can seamlessly update their card before a billing event. The alternative way is for you to either proactively or after a billing failure ask if there has been an update on any given card. We’ve found that the absolute best result is to run Account Updater in both modes and spend time optimizing the latter mode for specific billing plan frequencies.

Unfortunately, the requirements of Account Updater and its impact on customer retention are at odds with the requirements of tokenization in support of PCI. Most of the tokenization projects at the various vendors do not take the product requirements of Account Updater into consideration. How does one query the Account Updater service for the new card that may have replaced the one that failed when all you have is a handle to the old card? Unless your vendor has specifically added this to their tokenization implementation you are hostage to their product roadmap to save some significant percentage of subscriber churn. When you recall that few vendors are focused on the challenges of digital content and services with subscriptions, and instead get the bulk of their revenue from one time purchase physical goods merchants it makes sense that these tokenization projects have usually not addressed Account Updater functionality.

At Vindicia, we’ve built CashBox to both take you completely out of the PCI compliance burden with HOA and to directly and richly implement Account Updater with our merchant acquirer partners. We’ve also made the commitment to you that your customer data is yours should you want to move on. Once you experience the revenue increase we deliver through increased customer retention, we doubt you will. But that commitment is there to help end the tension between customer data ownership and tokenization as well – which is something I’ll touch on in a later post.

Gene HoffmanTags: , , , , , , , , , , , , , ,
Posted by Gene Hoffman in Best Practices, CEO Blog | 1 Comment »

Payment Ecosystem Myths – Part 1

Monday, November 29th, 2010

Running a digital business is incredibly complicated. In addition to figuring out how to get people to pay for your product, you have to deal with the complexity of accepting their payments.

When a company starts out and is testing its market viability, it doesn’t make sense to build unnecessary infrastructure. Many companies choose the easiest solution to get started, such as PayPal or Authorize.net, and worry about scale issues once they encounter them.

The downside of this approach is that companies are in the unfortunate situation of having to learn the ins-and-outs of the online payments ecosystem while experiencing the pain associated with scale issues. The wrong payments choices can put a company in jeopardy once it starts to gain traction.  We regularly encounter companies at just this point. While we’re happy to help, our goal is to get as much information around best practices to the online community as possible.

To that end, we hear several common misconceptions around accepting payments online and thought we could devote 2-3 blog posts to this issue.

“It’s too difficult to be the Merchant of Record” Being the merchant of record is more difficult than passing that responsibility on to another party. However, companies also give up many of the levers that will drive their future success, such as:

  • Customer Data – it is much harder to know who is actually purchasing your product, making it more difficult to understand what your customers want in the product or service offering. Also, depending on the agreement, companies may not be able to take their customer data with them when changing payment providers.
  • Metrics – without key data about purchases and billing, it is hard to determine when the customer purchasing experience is not working as smoothly as it could.
  • Billing Descriptor – this allows your customers to see your company and product on their credit card statement, limiting chargebacks and keeping your brand in front of good customers.
  • Marketing – companies may be limited in their ability to reach out to their good customers, both for promotions and for billing events.
  • Recourse – companies that are not merchant of record can be shut down at any time and for any reason by their payment provider. This is a dangerous way to run a business.

So what does it take to be merchant of record? Not as much as companies think… The biggest differences are the relationship with a payment processor and managing chargebacks to keep below the 1% (of transactions) limit imposed by the card networks.

“You can’t fight chargebacks on digital goods” This myth has persisted for quite a while, despite the best attempts to eradicate it.  This used to be the case, but many companies and groups (besides Vindicia), have fought this misconception with the card networks, payment processors and issuing banks. The truth of the matter is that chargebacks for digital goods face the same regulations as those on tangible goods. The biggest reason for this myth is showing proof of delivery. For digital goods merchants this takes the form of showing logins, engagement with the product, and purchase history – all are easily captured during the course of business and can be used as proof.

The exception to this rule is chargebacks on PayPal transactions. They are making progress and we are all working towards this goal, but they still don’t allow merchants to challenge chargebacks for digital goods.

Read about more payment myths in part 2 of this series.

Sanjay SarathyTags: , , ,
Posted by Sanjay Sarathy in Best Practices, Marketing Fury, Payments 101.201.301 | 2 Comments »
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