67% of respondents said there were drawbacks with their current approach, an alarming finding with many businesses adopting subscriptions and therefore crying out for agile systems and processes to help support their strategic shift.
“It’s just one blot on an otherwise positive subscriptions landscape painted by the survey,” says Louis Hall, CEO, Cerillion Technologies, “but it is a significant one. Over the long-term, the subscription revolution will depend on the success businesses have in implementing flexible pricing and payment strategies. For many businesses, delivering a greater range of choice is the key differentiator as they fight to win new customers; retain existing ones and build competitive edge.”
The urgency of this need is underlined by the steady growth in subscriptions that the survey highlights, as businesses strive for predictable recurring revenue streams to drive customer engagement. According to the findings, 69% of organisations are already generating some subscription revenue, with this figure set to reach 75% in three years’ time.
Today, the subscription revolution is primarily being fuelled by mid-sized organisations. Indeed, the survey reveals much greater adoption of subscriptions in companies with €11-50m (87%) and €51-200m (86%) in annual revenues, compared with 68% of companies with revenue over €200m and only 55% of companies with revenue less than €2m.
The direction of travel among all sizes of business, however, is clearly towards subscriptions. Underlining this, the survey shows a positive shift in the proportion of revenue generated through subscriptions with those earning more than half of their revenues in this way set to rise from 17% today to 35% three years from now.
This has led to a raft of new pricing strategies including bundling, usage-based pricing and pre-pay, as well as a growing trend for organisations to implement more flexible payment models both in terms of type and frequency of payment terms offered to customers. Already today, 74% of organisations offer more than one payment method, and 38% use four or more, showing that offering a choice of payment methods is crucial for many businesses, both in terms of addressing more customer segments and streamlining the flow of money into the business.
The survey also reveals interesting differences between countries in terms of preferred payment frequencies. Annual payments, for example, are by far the most popular option in the UK, used by 45% of respondents, whereas in France, monthly (50%) and quarterly (46%) are the preferred options.
“Businesses are clearly looking to move towards more flexible pricing and payment models as they focus on making a success of subscriptions in an increasingly competitive market,” adds Hall, “but the scale of their ambition to do this also explains their level of concern about having the right technology in place to support it. They are understandably worried that their back office systems and processes will not allow them to sustain their plans.”
Karl Whitelock, Director, Global Strategy – Operations, Orchestration, Data Analytics & Monetization (ODAM), at Stratecast | Frost & Sullivan, states: “Setting business strategy around limitations of the billing process, rather than requiring the billing system to meet the company’s strategic needs, will eventually stifle innovation, limit customer appeal and suppress growth. SaaS-based billing suppliers such as Cerillion, with a deep level of business and technical experience tied to usage-based billing, provide an ideal means by which any business, in very short order, can transform to a services company.”
For more information, visit http://www.cerillion.com/News-Events/White-Papers/Customer-Engagement-Made-Easy to download the Cerillion white paper, “Customer Engagement Made Easy - Why Flexible Pricing is the Bedrock of Subscription Success”.