Make your recurring revenue from subscription commerce more predictable
Ravin Checker, CEO, Synthesis Systems
Make recurring revenues even more predictable
Given that an increasing number of businesses have turned to a subscription-based business model, it is no surprise that subscription commerce has witnessed unprecedented growth in the past couple of years. Whether it is B2C or B2B organizations, all of them benefit from subscriptions, giving them an edge over their competitors.
It is perhaps their inherent predictability that makes subscriptions so attractive and profitable. Even though their retention-based nature is often considered an assurance of recurring business and growth, sub-com (subscription-commerce) isn’t actually that simple. It is similar to e-commerce, as it involves numerous functional and non-functional risks. Of these, building a predictable revenue model is a significant challenge which requires dynamic solutions.
One way to create a predictable revenue model is through a revenue predictability index – a practical approach to resolve (or prevent) actual and anticipated issues related to operational inadequacies. It is possible to grow profits and revenues using proven process-improvement methods.
A subscription commerce business, irrespective of how successful it is, cannot enhance its revenue predictability without first identifying its problem areas. The business needs to carefully evaluate the various stages of its development to identify the bottlenecks.
#1 Understanding the intricacies of Sub-com
As straight-forward as it may seem, subscription commerce is in fact quite complicated. There are several areas within subscription management that need to be approached with due consideration. These could be logistics, payments, operations, customization options, security, risk management, and so on. Typically, businesses should aim for a solution that enables the smooth integration of all the critical factors, thereby ensuring maximum revenue efficiency.
#2 Identifying Revenue Loss
Subscriptions emphasize customer acquisition and retention, and rightfully so. After all, building long-term relationships with customers spells success for a sub-com business. However, there is another very crucial aspect that often goes neglected: revenue loss occurring at the different stages of the business lifecycle. A large part of this loss can be reclaimed and brought back into the revenue stream by conducting an in-depth analysis to identify the areas that aren’t delivering as expected and taking appropriate measures.
#3 Marketing and the data
In his book Subscribed, Tien Tzuo, founder and CEO of Zuora, talks about the changing face of marketing in the world of subscriptions. The 4 Ps (product, pricing, packaging, and place) no longer hold the same meanings as they did before, and inevitably so, as the product has now become a service. Hence, to achieve predictability in business, marketing has to be backed by data.
Gain as many consumer insights as possible and pay close attention to the feedback received from existing consumers. By adopting target-based marketing strategies, businesses increase their probability to achieve sustained predictability.
#4 Track your Sales
Building a sales process that produces consistent results over a period of time is fundamental to reach predictable business growth. For this purpose, tracking different sales metrics is an absolute must which helps to build a realistic picture of the inter-relation between them, and where a business stands in terms of current revenue. It also provides clarity about how the prospective growth plans may translate into revenue in the future.
On attaining sustained growth through sales, Tien Tzuo talks about the importance of adopting a multi-pronged strategy that must include the following:
- Minimizing the churn rate
- Expanding the sales team
- Increasing value through cross and up-sells
- Optimizing pricing and packaging
#5 Tailored-Payment Models
Since revenue collection forms a major chunk of revenue assurance, having a tiered-pricing strategy and enabling smart, customized billing and payment methods could be helpful in minimizing financial under-performance. The need for customization especially holds true for businesses that host a global presence, as consumers are more likely to stay if they are able to interact with the interface in their native language and make payments through payment methods of their liking.
#6 Maintaining a Dedicated Customer-base
Once a subscription business scales up to a certain level, the major portion of its revenue begins flowing in through its existing consumer base instead of the new ones. Renewals, cross-sells and up-sells are the most common methods of how subscriptions can sustain and grow their income in the long-run. It’s imperative to engage with the existing consumers and hold on to them.
Revenue predictability is undoubtedly one of the biggest benefits of subscription commerce, and it explains why so many businesses are drawn towards it in such large numbers. However, to make the most of it, it is necessary that robust processes are not only put in place but also implemented and executed flawlessly to generate superior and consistent results.
Our experts can do a quick assessment using the “Predictable Revenue Index” and give you even more specific guidance to help you build assured and recurring revenue. Talk to us.