Flipping the switch Moving to the Subscription Economy

The subscription economy is changing the relationship between customer and vendor. Customers want an outcome; a reliable product or service without the hassle of worrying about the assets. But this type of interaction can only be possible if they trust the vendor. With each interaction, the vendor is working to gain the trust of the customer so that the relationship continues and their business grows.  

According to Gartner and Zuora, by 2020, more than 80% of software vendors will move from a license plus maintenance business model to a subscription business model, regardless of whether the software resides on-premises or in the cloud.  

Assuming you have a fantastic product offering (let’s say it’s a top notch, market-leading SPM solution), making the transition from a perpetual business model to a subscription-based model always starts with the customer. In this model, customers aren’t burdened with the day-to-day of product ownership, but are focused on their business. Your goal is to ensure that their vision of success becomes realized.

Most companies deliver their subscription service with the goal of proving the value of their offering quickly to justify the investment the client has made. Once you’ve achieved this milestone, your organization needs to leverage this win to ensure you have a long term, happy customer and find new ways to expand that relationship even further. This means that you need to realign your thinking of what defines success and how to continue to motivate and drive your team based on new metrics. As you transition to a subscription-based business model, the way that you measure success fundamentally changes. In the subscription economy, there are many layers to each sale. Gone are the days when a customer would only interact with a single sales representative. In one transaction, a customer may touch several departments: marketing, business development, sales, finance, customer success and professional services.

If there are multiple touch points for a single customer, the metrics which you use to evaluate, compensate and plan for success, change. Focus shifts from Costs of Goods sold and Sales Revenue to Cost of Acquisition of a Customer and Customer Lifetime Value. The success of your business depends on the fact that a customer will continue their trusted relationship with you, so you begin to use Customer Engagement as another metric — how they use your product, whether they add on additional products or services, and what length they commit to?  Factors such as Monthly, Quarterly and Annual Recurring Revenue become part of the equation and there are many different functional teams that have to be compensated for their part in developing, building and maintaining the relationship with the customer: from sale to implementation, to enablement.

As the number of metrics considered for success increases, and the number of people involved in the customer journey grows, calculating compensation for all teams involved becomes complicated. Because of all the factors involved, compensation calculations require information from a variety of different sources (ERP, CRM, CSM, etc.). A complete sales performance management solution makes the cross-departmental collaboration required for a successful subscription-based business possible. By accessing all required data sources on a unified platform, an SPM solution provides organizations with end to end sales capabilities.

 
To learn more about how Obero SPM can provide your subscription business with the complete sales performance management solution, click here.

To learn more about how Obero SPM can provide your subscription business with the complete sales performance management solution

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