Saturday, May 19, 2012

3 Key Metrics That Matter in the New Subscription Economy


Zuora, a dominant player in cloud-based payments systems, presented at last week’s All About the Cloud Conference, hosted by the Software and Information Industry Association (SIIA). The company's founder and CEO, Tien Tzuo, spoke about the dramatic shift in the way both consumers and companies are doing business. "Today," Tien explained, "People would rather subscribe to products and services than buy them outright." products. It's happening everywhere and is having a dramatic affect on your business.
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Zuora calls this "The Subscription Economy." Instead of single large purchases, the model is built on sustained customer relationships. For companies, the longer and stronger you can build these relationships, the more opportunities you get to first maintain, then increase recurring revenue.

Salesforce.com is a terrific example of this type of consumption. Product performance and customer service are both critical to establishing high customer retention, and that's why the company religiously focuses on each. But subscriptions aren't limited to online consumption either. Lots of new retail consumer offerings have appeared in the marketplace. New companies include:
  • Lollihop sends out a monthly taste box of healthy snacks, curated for those with an active lifestyle.
  • Hoseanna lets busy women order a monthly set of pantyhose, intimacy, feminine care, and other health and beauty necessities straight to their door. 
  • Bluum sends a monthly box containing 4-5 deluxe product samples like organic skin care, lip balm, stretch-mark cream, small toys, snacks and baby wipes to member’s homes for user testing and evaluation.  
According to Zuora, however, these subscriptions introduce a new set of challenges for businesses. There's a new set of rules for success in the Subscription Economy, and the emergence of this new consumption trend necessitates a change in the way businesses log and account for sales. 


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