subscribing to the future
DESCRIPTION
Presented by Dominic Smith (Marketing Director, Cerillion Technologies) at IP Expo 2013 in London. The subscription revolution is gaining momentum in all industries as more and more companies see the benefits of moving to a recurring revenue model. Predictable costs for the customer and predictable revenue for the service provider means that the simplicity of subscriptions is a very appealing proposition for both parties. However, we’re already seeing evidence of how a simple subscription-only business model is increasingly vulnerable in a competitive market. Consequently service providers need more pricing tools at their disposal in order to differentiate their services and create real value in their customer relationships. In this presentation, you will learn about the benefits and pitfalls of various different pricing strategies, including subscriptions, freemium, pay-per-use and bundling, and find out what to look for, and what to avoid, when implementing a cloud billing solution.TRANSCRIPT
Dominic Smith Marketing Director
Cerillion Technologies
Subscribing to the future
Introduction
The Subscription Revolution
Competitive Pressures
Pricing Strategies
Cloud Billing Applications
What to look for
What to avoid!
Summary
Agenda
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The Subscription Revolution
Individual product sales
Unpredictable revenue
High cost of sales
Loyalty cards
Warranty registrations
Selling a *relationship*
Regular customer contact
Guaranteed revenue
Upsell and cross-sell
Renewals and upgrades
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PRODUCTS SERVICES
Subscription Examples
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Consumer
Digital Services Goods as a Service
Enterprise Education
Automotive
Industry Adoption of Subscriptions
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Maturity
Gro
wth
Telecoms
Utilities
Digital Services
IaaS / PaaS
Retail Automotive
Insurance
Publishing
Media
Public Sector Transport
Education
Healthcare Not for Profit
Bubble Size = Current Market Size
Competitive Pressures
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Porter’s Five Forces Michael E. Porter, Harvard Business School (1979)
Diagram courtesy of Graham Childs, Wikimedia Commons
Used to determine the attractiveness of a market
Applies to both Product and Service markets
Competitive Pressures
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Threat of Substitute Products
• Physical products replaced by digital
• Over-the-top (OTT) services
Threat of New
Entrants
• Low barriers to entry for digital services
• Competitors from lower cost locations
Bargaining Power of
Customers
• Online comparison services
• Social Media
Subscriptions – what customers think
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Over-paying?
All I Can Eat
Simplicity
Predictable Cost
Lower Quality
Locked-in
Gym Membership Statistics (USA)
$55/month average subscription
$39/month average wasted from under utilisation
67% of members never go to the gym!
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Subscriptions – one-size-fits-all?
Source: http://www.statisticbrain.com/
Other Pricing Strategies
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Freemium
Bundling
Pay per Use
Greater market awareness / penetration
Pre-qualified leads for upsell
Average 1% conversion rate
No loyalty to free version
Adds value to the principal offering
Increases penetration for niche offerings
Diminishes the value of niche offerings
Try out a premium service
Flexible control of spend
Higher price per unit
Subscriptions – Pricing Flexibility
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Freemium Bundling
Pay Per Use
Prepay
Rewards
Discounts
Promotions
Consumers and Businesses
• One-size-fits-all approach to market
• Light touch sales process (order-taking)
• Automatic payments (e.g. recurring credit card, direct debit, etc)
• Tailored offers unique to each enterprise
• Active selling & account management
• Managing enterprise structure/cost centres
• Offline payments (Net 30) B
usi
ness
-to-C
onsu
mer
(B2C)
Busin
ess-to
-Busin
ess (B
2B)
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Subscribing to the future
Club Memberships
• Annual subs
• Monthly subs
• Day passes
• Prepay “lifestyle”
Enterprise Software
• Per seat
• Transactions
• Bundles + overage
• Pay as you go
Retail Goods
• Goods-as-a-Service
• Base product/ maintenance
• Upsell add-ons/upgrades
Cosmetic Surgery
• Care plans
• Spread cost of high value items
• Botox-as-a-Service ?!
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Pricing flexibility (mix subscription / usage models)
Designed for B2C and B2B services
Enterprise SLAs (billing / payment data!)
Transaction processing performance & scalability
Company stability and billing expertise
What to look for in a cloud billing app
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SaaS Checklist
Multi-tenancy
No hardware required
Implement in days/weeks
Try before you buy
Configuration but not customisation
Vendor independent services
Regular software updates
Easy data import / export
Pay for what you use
Multi-device support
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What to avoid!
“Cloud-based” Systems
In summary
The subscription revolution is gathering momentum in all industries
Competitive pressure means that simple subscriptions must evolve to more sophisticated charging and billing models
The new generation of cloud billing applications means that flexible and scalable billing is no longer the preserve of on-premise systems
Beware of “cloud-based” systems that are not all they seem
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Any questions?
Cerillion Skyline is a next generation Cloud Billing solution
for digital and non-digital services
www.cerillionskyline.com @skylinebilling
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Customers
Products
Billing
Payments
Financials
Collections
Usage
Security
Reports
Integration