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Denis Pombriant, Beagle Research Today you can buy almost anything through a subscription from food and wine to clothing and accessories to cars and, yes, software. While most audience members may be familiar with subscriptions from the consumption perspective, subscriptions are changing much of what we know about all aspects of business. Managing a subscription company can be challenging in part because customers are invisible across the Internet. Frequently managers have to rely on insufficient information for decision making. This session explores how subscription companies’ information needs are different and discusses some of the top metrics that subscription managers can obtain from customer data to manage their businesses better.
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Denis PombriantManaging PrincipalBeagle Research Group, LLC
Driving Success with Subscriptions
Making a Win/Win
The New Paradigm
BUY NOW SUBSCRIBE
Then Now
Lots of Tech Examples
Beyond Tech…
“By 2015, 35% of Global 2000 companies will generate revenue through subscription-based services and revenue models.”
Driving the Subscription Economy
Technology Trends Economy Business
ModelCapitalism at its Best
Vendor Side Less Pretty
Lower cost of entry Ability to modify agreement almost
at will Lower ongoing costs Greater reliability
Business Model Advantages
More customers can suddenly afford your product
Greater flexibility Configuring products Taking them to market
Rapidly scale your business Eventually more
predictable revenue streams, if you manage the business right
Vendors Like It Too
More invoices to process (and get right!)
The possibility of customer change at any moment requires great flexibility from your systems
Rapid product prototyping SKUs!!!
You can’t reach out and touch your customers
Can Your Systems Keep Up?
Four Key Attributes
Subscription Reality
Capture Big Data
Social Media
Financial Systems
Analytics and
Predictive Modeling
Develop Metrics
Customer data – social media
Use data – primary system
Financial data – financial system
Big Data
They do different things and you need both
Analytics Retrospective,
How did we do? Predictive
modeling What if?
Analytics and Modeling
No Perfect Metrics
Recurring Revenue — ARR, MRR Deferred revenue (booked, unbilled,
etc.) Customer Churn Rate – Avoidable? Renewals Customer Lifetime Value Value Remaining Gross/Net Attrition — avoidable,
unavoidable
Metrics
Customer Churn Rate The historical average of the percentage
of customers who leave a service on a monthly basis.
Growth [ARR * Retention Rate] + [Unbilled
Deferred Revenue for forward 12 months] – [Projected Churn] + Planned Growth Rate * Last 12 months ARR
Some Basics
Many Interpretations
Retention rate: What % of ARR comes back? How hard is it to keep?
Recurring Profit Margin: ARR – Churn – Non-growth Spend
Growth Efficiency: Cost of getting $1 of new ACV (affected by marketing costs + onboarding costs + upgrades, renewals, churn etc.)
Core Ideas
In Short…
“The metrics for Cloud computing is fairly different from traditional enterprise software.”
Bessemer Venture Partners – Top 10 Laws for Cloud Computing
Metrics Matter
Conventional ERP ERP + spreadsheets Roll your own Only captures data Still need good analytics
You Really Need a System
Your Business Processes
CRM ERP GL
Lots of Vendors
Achdirect, Aria Systems, Ascenduregroup, Batchbill, Bill.com, Billing Circle, Blusynergy, Cannibill, Chargebee, Chargify, Cheddargetter, ChickPea, Cloudability, ,Evapt, Fusebill, Magnaquest, Metanga, Monexa, NetSuite, Paysimple, Recurly, Saasy, Zuora
Subscription business model is here to stay
Your customers see you as an expert You are going to need it as markets
continue to shift Embracing it will help you grow your
business Use case for analytics and metrics
Conclusions
Beagle Research Group, LLCwww.BeagleResearch.com
781-297-0066
Thanks!
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