In the subscription economy, cost of delivery matters in setting prices, but the factor that’s quickly becoming dominant is value delivered. As described in the book B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship, customers increasingly want to pay for outcomes, or “realized value.”
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 […]
This is the third research alert in a series on pricing. One alert examined why metering access maximizes revenue. The other examined ways in which metering could be effectively applied through tiering at the user level. This research alert examines how to benchmark and manage yield across your license structure, and specifically with site licenses that blend users and discounting. Site licenses give customers unlimited use of a service while paying a flat, discounted price. The customer motivation to buy site licenses is that it makes purchasing decisions easier than trying to determine which users need which licenses. Another customer motivation for site licenses is that it makes on-going administration easier than trying to manage users and license allocations. For […]
Maximizing revenue from digital subscriptions is dependent on monetizing usage rather than the users themselves. Comparing print subscriptions to digital subscriptions highlights why usage behavior is the basis of revenue, and applying the principles of yield management shows why metered pricing models produce the most revenue. Why Usage? Comparing Print vs. Digital Subscriptions Based on the fact that print is a physically distributed product and digital is an on-demand service, print subscriptions differ from digital subscriptions in three critical ways: Fixed vs. Variable Content Delivery. The print product has a fixed definition of content delivery which is received by every customer that purchases a subscription. A digital service has a variable definition of content delivery because usage varies across customers. […]
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