There are many order capture scenarios prevalent in the eCommerce space today. Some of the commonly used are – pre-orders, recurring orders & subscriptions.
These order capture mechanisms are appropriate for different situations and different kind of products. For example, pre-orders are great for allowing shoppers to reserve their own personal copy of a highly anticipated product.
In this 2 part blog post, we will explore the above mentioned order capture mechanisms and also cover the various points that need to be kept in mind while implementing them using the IBM Commerce portfolio of products. Part 1 (aka this one) will cover subscriptions and recurring orders, while part 2 (coming next week) will cover pre-orders.
Subscriptions & Recurring Orders
Subscription is a business model where a customer must pay a subscription price to have access to the product/service. The model was pioneered by magazines and newspapers, but is now used by many businesses and websites. Recurring orders are similar to subscriptions in that they also allow shoppers to buy the same items on a periodic basis without having to place orders repeatedly.
In case of subscriptions, the time period and frequency is determined by the retailer. For example, a publisher decides that a magazine will be offered on a monthly basis and at 1 or 2 year subscriptions. While in case of recurring orders, the time period and frequency is usually decided by the shopper. For example, a shopper decides that she wants 1 litre of milk to be delivered to her every day for the next 3 months.
There are multiple benefits of subscriptions and recurring orders, some of which are mentioned below:
- Retailers benefit as they are assured of a predictable and constant revenue stream from the subscribed shoppers.
- It increases customer loyalty by allowing customers to become greatly attached to using the product or service and, therefore, be more likely to renew when the time comes.
- It reduces customer acquisition costs and allows for personalized marketing.
Subscriptions and recurring orders are supported out of the box by IBM Commerce solutions, namely, WebSphere Commerce and Sterling Order Management. However, there are certain aspects that a retailer must think through before implementing this feature as it can have an impact across almost all of the eCommerce subsystems.
Merchandising & Marketing
- Before a product can be bought as a subscription or be part of a recurring order, it needs to be marked as such. This can be done using IBM Management Center for WebSphere Commerce or via the catalog data load process. The retailer needs to prepare this data and ensure that the additional properties, for e.g. subscription frequency and time period, are included in the catalog data.
- Another aspect to consider is product life-cycle management. If a product is withdrawn from sale, what happens to the subscriptions & recurring orders that it is part of? One option could be to proactively cancel such orders and email the customers giving them a choice to order similar products (an opportunity for cross-selling and up-selling).
The payment for a subscription is usually captured upfront for the entire duration. On the other hand, for a recurring order the payment may be captured when each instance of the recurring order is processed. This introduces many complexities in the management of payment. For example, how do you handle the case where the credit card provided at the time of placing the original recurring order expires? In WebSphere Commerce, the recurring order will be cancelled if the payment for one of its instances fails during order processing. The customer can then be informed through an email or SMS and be asked to place a new recurring order. Additionally, there are 3rd party recurring billing management systems available that handle the many subtle complexities of subscription based payments, such as automatically emailing customers about credit cards expiring. Such systems could theoretically be integrated with WebSphere Commerce to handle credit card expiry detection and notification proactively.
Pricing & shipping
As mentioned in the previous point, payment for a subscription is usually captured upfront. So, the total price being charged to the customer includes the price for all the items for the entire duration of the subscription. Any future price changes will not affect the customer during the period of subscription. While for recurring orders, it is common to capture the payment as and when each instance is processed. In this case, it is up to the business to decide whether the original price applicable at the time of placing the recurring order should be honored or should the current price be taken into account.
When a customer places a recurring order, the retailer is in effect promising the customer that the items will be available for the entire time period chosen by the customer. However, it may happen that the items are out of stock at the time of fulfillment of an instance of a recurring order. What should be the business process in this case? In WebSphere Commerce, the out of box behavior is for the recurring order to be automatically cancelled and the customer to be notified of the fact via email or SMS. An alternative approach could be to delay the fulfillment of the particular instance of the recurring order till inventory becomes available. This may be a good option if inventory is expected to be available soon and the customer can accept a delay. The customer could also be given a choice to accept similar products that are in stock providing an opportunity for cross-selling and up-selling. These alternative approaches do not come out of box but could possibly be implemented with some customization.
For normal orders, different retailers have different policies on whether they allow an order to be modified by the customer once it has been submitted. A common practice is to provide a short window of time (maybe a couple of hours), before an order is sent for fulfillment, in which the customer can request for changes in an order via the retailer’s call center. Once the order is sent to the backend system for processing then only cancellations may be allowed. In case of recurring orders there is further thought to be given, since a customer may want to edit one of the instances of the recurring order or maybe the remaining unfulfilled instances of the order at some point of time in the future. In this case, it may be simpler to just cancel the recurring order and allow the customer to place a new one.
Returns, refunds & cancellations
The return process for a normal order itself can be complex depending on the process and business policies followed by a retailer, but there can be additional intricacies involved in case of subscriptions and recurring orders. Consider a scenario where a customer has subscribed to a monthly magazine for a year and has paid the total subscription cost upfront. A few months in to the subscription the customer decides to cancel it. How much refund is the customer entitled to? You would need to work out the refund by calculating the proportionate cost of each magazine issue and then deducting the cost of the issues that the customer has already received.
Providing customer service via the phone and email can be expensive. It is always a good idea to empower customers to manage their account and order information through the online store. Features like order history are pretty much standard these days. But in case of recurring orders and subscriptions, some additional functionality may be required to make self-service truly effective. Customers should be allowed to track and manage their subscriptions. They should be able to view the history of not just the order originally placed but also the recurring instances of the order. They should be allowed to cancel or edit the orders (within the boundaries of the business policies governing it of course). They should receive appropriate notifications of actions to be taken, for example, if a subscription is up for renewal.
In this blog post, we discussed the main business processes involved in subscriptions and recurring orders. In next week’s post, we will explore pre-orders and how they can be leveraged by retailers.