Entitlement in the SaaS industry provides the answer to the question: Is the user allowed (entitled) to use this service or product at a given time? It provides information about the service’s start and end dates (or pause and resume dates) along with specifics about the type of service or product.
Here’s an example of basic entitlement functionality: Accounting notices the customer has not paid. They inform Customer Service, who toggles the customer’s software access to OFF.
Ideally, though, if you’re trying to scale your SaaS, you want entitlement to be automated (based on your organization’s policies). You also want to easily make changes to entitlement policy without requiring months of IT work.
Entitlement and Billing: Separate But Connected
With SaaS entitlement management, it’s crucial to separate the Billing view and the Entitlement view associated with a subscription. Many situations exist where the two perspectives don’t coincide.
For example, the user receives access to a service (entitlement) before the SaaS bills them. This can happen during a setup period; the SaaS is still configuring the customer’s account. The full functionality isn’t ready for the customer to use. Therefore, the SaaS doesn’t bill them yet, but he can already access his account and maybe a subset of the functionality.
A couple of other examples where the Billing view and Entitlement view don’t correspond:
- The user cancels her subscription, but the system is configured to continue billing until the end of the term to avoid pro-ration credit.
- The user’s recurring payment transaction fails. The system pauses their access while attempting to resolve the payment issue.
As you can see, it’s clear that entitlement impacts billing. The two are connected, but they are not necessarily aligned.
Entitlement Management Must-Have Functionality
All right, you now have the basics of SaaS entitlement management: the separation of access from billing. But there’s more to consider.
The list below isn’t comprehensive, but it’s a start to get you thinking about your own system’s entitlement needs. For example, each of these requirements creates a corresponding change in billing and system access:
- Pause and resume the subscription when a customer requests it.
- Change the customer to a different product with either fewer or more software features.
- Pause the subscription in response to failed payment transactions.
- Provide potential customers with free access to the system during a trial period.
Another aspect to consider is automating the communication that occurs on or before a subscription event:
- Email customers X number of days before billing them or renewing their subscriptions.
- Email customers when payment transactions fail.
To summarize, the entitlement management system is the source of truth about which services a user can access. Entitlement and billing are very closely associated. They need to be in sync but can require separate business logic.
Don’t Let SaaS Entitlement Be an Afterthought
Traditional billing solutions tend to focus on the invoicing aspect. They either leave entitlement management to some other system or do not have enough flexibility.
If you are currently using a single entitlement model built into a SaaS application, trying to switch to manage multiple models requires extensive engineering effort and man-hours. The time and effort relate not only to enforcing rights but also to billing and compensation models.
Trying to build a SaaS entitlement system on top of a billing system that wasn’t designed for it can be a painful undertaking. And if you rely on a third party for entitlement data, your product might become unavailable to your customers when the third party goes down.
We designed Kill Bill to allow both views of the subscription to be part of the same system and yet provide enough flexibility to control the behavior via user-defined policies.
Did you enjoy this blog post? Then check out our blog post on account updaters!