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Considering a Subscription Model? Avoid These Rookie Mistakes | IndustryWeek

The subscription economy is taking business by storm. Entire industries have moved to subscription-based pricing, leaving behind some of the slow movers but also giving new life to companies that were struggling. Some talk about the end of ownership and the start of usership. It is a real revolution.

Industrial companies have lately been getting on the bandwagon. BAE, NCR, Caterpillar, Siemens, Thales, Honeywell, GE, ABB and others are proposing subscription-based digital offers to their direct customers and channel partners.  Many such companies are just getting started with these flexible consumption business and pricing models, and they are prone to making mistakes from the very beginning.

Industrial companies need to pay closer attention to the successes and failures of their B2C counterparts. As you embark on you subscription journey, here are 10 mistakes to watch out for.

1. Setting subscription prices solely based on cost. In many industrial groups, cost-plus pricing is the de facto methodology for price-setting. It is internally focused and provides a sense of control. Applying this methodology to subscription-based pricing in a world that is dematerializing and commoditizing is irresponsible. In digital, the cost of devices and accessories are plummeting, and the rate of equipment obsolescence is accelerating. Pricing solely based on cost automatically means prices are going down cycle after cycle. It is not sustainable. Subscription-based pricing should be based on the 3Cs of price-setting: customer, cost, and competition.

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Considering a Subscription Model? Avoid These Rookie Mistakes.

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