Author Archive | Matt Shanahan

99 Reasons to Care About Customer Usage

In the Subscription Economy, purchase-to-use is winning, and purchase-to-own is on its way out. Why? It’s simple: We only want to pay for the value we receive from a product or service—and we only receive value when we’re using that product or service. As the following graphs show, current subscription models could see as much as a 99 percent erosion in revenue based on some usage profiles—unless providers can develop strategies for pricing and customer adoption that prevent that loss. The evolution from purchase-to-own to purchase-to-use is inevitable, even though it will vary by industry and customer segment. The last research alert http://research.scoutanalytics.com/subscriptions/per-user-per-month-subscriptions-the-first-step-in-changing-customer-behavior/ documented how this trend might evolve in B2B SaaS, while this research alert will show impact to […]

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. NPS measures the relative amount of customers who are promoters of a particular brand or company (i.e., fans) versus those who are detractors by measuring the difference between the two. NPS can […]