Archive | 2013

Per-User-Per-Month Subscriptions the First Step in Changing Customer Behavior

The Subscription Economy is fundamentally changing customer purchase behavior — it is teaching customers to only pay for what they actually consume. The popular per-user-per-month subscription model used by software as a service (SaaS) is only a first step. The true realization of utility computing as a revenue model is still on the way, and the providers that understand monetizing usage are the ones that will thrive. We are still in the early stages of the Subscription Economy. Many products from information and media to SaaS are being sold on a per-user-per-month model that create revenue with or without product usage. In B2B SaaS subscriptions, Gartner continues to warn of shelfware-as-a-service. A startup called Applango claims 30% of subscriptions are […]

Want to Increase Revenue? Stop Selling and Start Billing.

One of the best practices taking hold in the B2B subscription economy is the automatic renewal – issuing an invoice sixty days before renewals. The interesting effect of automatic renewals is to increase revenue and lower costs. Across multiple companies, Scout Research has benchmarked a four percent or more increase in renewal revenue yield by using this practice. Here are the findings on one case example. Historically, account managers contact customers to confirm the renewal terms and timing. The practice stems from the on-premise product world where customers could continue to receive value whether their maintenance contracts had been paid. As you can imagine, the practice has continued into the subscription economy, but it is not necessary. In the subscription […]

Net Promoter Scores: The Good, The Bad, And The Ugly

The Net Promoter Score (NPS) is largely popular due to its successful implementation by companies such as American Express, Apple, and Southwest Airlines. While these scores provide insights on customer satisfaction, they are limited in their ability to prevent churn. A real example provides a case in point, but first a little more information about the NPS. The NPS is a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix. The 2003 Harvard Business Review article, “One Number You Need to Grow,” introduced the concept. What is a good Net Promoter Score and how does it work? NPS measures the relative amount of customers who are promoters of a particular brand or company (i.e., fans) versus those who […]

Mind the Gap: Avoiding Revenue Pitfalls in the Subscription Economy

In the book “Consumption Economics,” the authors describe a phenomenon called the “consumption gap” which is essentially the difference between a product’s capability and what a customer actually uses. The authors point out that this consumption gap will be a catalyst for technology business failures in the Subscription Economy. But how does a company know if they have a consumption gap? How do they quantify it? And how do they avoid revenue churn because of the gap? Step 1: Measure the Gap To evaluate if you have a consumption gap, you need to measure and quantify it. That means you need to take inventory on your product’s capabilities and how much a particular customer uses them. For offering, the most […]