Subscription Terminology 101.

Product-as-a-service, PaaS, means the customer purchases the desired result instead of the equipment or product itself, and the system is run in a subscription-based business model. In this model, the customer does not own the product; rather they pay for the product and the services included in the bundle. They return the product once the subscription period is over and the product owner can sanitize, inspect, and repair the product, if needed, for another rental cycle.

You can differentiate between the different types of subscription businesses based on the type of product being offered as a service.

The difference between subscription and leasing can be best understood via two differentiating comapirsion points; customer’s intent and commitment to an asset.

Subscription management is a term used to refer to the process of managing subscription-specific operations that go beyond recurring billing and recurring invoicing. Recurring payments are only a part of subscription payments. In recurring payments, a customer authorises the vendor to deduct payment at an agreed upon frequency on an ongoing basis.

A recurring revenue model is a type of business model in which a vendor does not sell the product at the purchase price but instead offers access to a product as a service in exchange for regular scheduled payments. By giving access to the product, the vendor retains the ownership of the product and generates payments on a recurring basis.

Recurring billing is a collective term for the frequency, duration and amount of “bill” to be charged by a business to its customers. Recurring billing is a process that ensures that the customers of a subscription business are “billed” and the “bills” are collected on time.

A very rewarding aspect of subscription models is recurring payments. Recurring revenue is often seen as a golden goose for subscription businesses.