Pricer’s Points: Subscription Monetization | Felix Krohn

The “Subscription Economy” is a term originally coined by Zuora CEO, Tien Tzuo, and since then picked-up by many media, describing a trend throughout most industries where traditional pay-per-products/services offerings are moving toward subscription-based business models and, consequently, transactional revenues are shifting to recurring revenues.

This Subscription Economy has emerged due to select changes in market conditions, with digital technology being the main enabler that paved the way for new business models. For example, cloud-based software sets the basis for ongoing usage and customer behavior analytics allowing vendors to gain a much better understanding of customer needs and the value their software provides in responding to these needs. Sensors, mobile, cloud, Blockchain & IoT are creating unparalleled amounts of data, which allows for the creation of new customized services with different offerings and pricing models. At the same time, customers switching from buying things to buying experiences are demanding instant access to such services rather than traditional ownership and thus, growth is achieved by developing and monetizing long-term relationships. Customer centricity as epitomized by the likes of Amazon, Netflix, Spotify, Salesforce and Adobe and it is not just a trend, but a significant revenue driver that is relevant to nearly every industry: 80% of all companies are seeing a change in how their customers want to access and pay for goods and services, which is no longer limited to tech companies, but increasingly includes traditional markets such as fast-moving consumer goods, books, travel & leisure, etc.

With these developments in mind, some companies already go after the subscription opportunity by offering their customers a portfolio of different pricing and billing options, while others have not yet figured out whether and how to do this.

Last, but not least, the role of Pricing is evolving as the focus moves from stand-alone, one-off prices to relationship-based price models. Bundling becomes more important and – together with well-designed add-on features – determines the subscription customers will eventually pay for. With better information about their customers’ behavior subscription companies better understand the value they provide to each customer specifically and drive to fully capture it through constant price optimization. Packaging & pricing constitute an ever more important discipline for every business.

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Subscription Monetization | Felix Krohn.