SugarCon 2013: How the Subscription Economy is Affecting Businesses and CRM


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Denis Pombriant, Beagle Research

Today you can buy almost anything through a subscription from food and wine to clothing and accessories to cars and, yes, software. While most audience members may be familiar with subscriptions from the consumption perspective, subscriptions are changing much of what we know about all aspects of business. Managing a subscription company can be challenging in part because customers are invisible across the Internet. Frequently managers have to rely on insufficient information for decision making.
This session explores how subscription companies’ information needs are different and discusses some of the top metrics that subscription managers can obtain from customer data to manage their businesses better.

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  • Subscribe rather than purchase and save resources for other deploymentsEven the big guys are converting
  • Subscriptions are a happening thing. Avis bought ZipcarEither getting a better product or a better customer experience because the service fits your life better than the product alone.Younger demographic is adopting subscriptions and subscription products like bike sharing services
  • Technology trends — anything can be delivered as a service through Internet and fast, reliable shippingEconomy and Demand — slack demand in many sectors as people and companies want to preserve cash rather than spend large sums on single deploymentsBusiness Model — Better model for growth, lower overhead, more automated modelCapitalism at its finest — strips out the business clutter, enables vendors and customers to run lean, sets up a recurring revenue stream.
  • Vendors find it hard to make the switch because they take in revenue in smaller chunks and Wall Street doesn’t know how to value them.Hard to monetizeHard to explain to Wall StreetHard to keep customersHard to trackBut companies that don’t adopt eventually find that their customers and markets are moving away from them regardless.
  • The case for mobile and the need for it are realities that all businesses have to deal with. Over the last decade we’ve seen a growing infrastructure of standards, devices and increasingly powerful networks that have set the stage for very good mobile computing. These components have delivered the basics of mobile computing but most companies still need two very important bits that are unique to their businesses.
  • Too often budding subscription companies either try to make a conventional ERP system do the job with great difficulty or they build their own system (not a good use of resources) or they resort to spreadsheets (no controls, easily corrupted)
  • SugarCon 2013: How the Subscription Economy is Affecting Businesses and CRM

    1. 1. Denis PombriantManaging PrincipalBeagle Research Group, LLCDriving Successwith SubscriptionsMaking a Win/Win
    2. 2. The New ParadigmBUY NOW SUBSCRIBEThen Now
    3. 3. Lots of Tech Examples
    4. 4. Beyond Tech…“By2015, 35%of Global 2000 companies will generate revenuethroughsubscription-based servicesand revenuemodels.”
    5. 5. Driving the Subscription EconomyTechnologyTrendsEconomyBusinessModelCapitalismat its Best
    6. 6. Vendor Side Less Pretty
    7. 7.  Lower cost of entry Ability to modify agreement almost at will Lower ongoing costs Greater reliabilityBusiness Model Advantages
    8. 8.  More customers cansuddenly afford yourproduct Greater flexibility Configuring products Taking them to market Rapidly scale your business Eventually more predictablerevenue streams, if youmanage the business rightVendors Like It Too
    9. 9.  More invoices toprocess (and get right!) The possibility ofcustomer change atany moment requiresgreat flexibility fromyour systems Rapid productprototyping SKUs!!! You can’t reach out andtouch your customersCan Your Systems Keep Up?
    10. 10. Four Key AttributesSubscription RealityCaptureBig DataSocialMediaFinancialSystemsAnalyticsandPredictiveModelingDevelopMetrics
    11. 11.  Customer data –social media Use data – primarysystem Financial data –financial systemBig Data
    12. 12.  They do differentthings and youneed both Analytics Retrospective, Howdid we do? Predictive modeling What if?Analytics and Modeling
    13. 13. No Perfect Metrics
    14. 14.  Recurring Revenue — ARR, MRR Deferred revenue (booked, unbilled, etc.) Customer Churn Rate – Avoidable? Renewals Customer Lifetime Value Value Remaining Gross/Net Attrition — avoidable,unavoidableMetrics
    15. 15.  Customer Churn Rate The historical average of the percentage ofcustomers who leave a service on a monthlybasis. Growth [ARR * Retention Rate] + [Unbilled DeferredRevenue for forward 12 months] – [ProjectedChurn] + Planned Growth Rate * Last 12months ARRSome Basics
    16. 16. Many Interpretations
    17. 17.  Retention rate: What % of ARR comesback? How hard is it to keep? Recurring Profit Margin: ARR – Churn –Non-growth Spend Growth Efficiency: Cost of getting $1 ofnew ACV (affected by marketing costs +onboarding costs + upgrades, renewals,churn etc.)Core Ideas
    18. 18. In Short…“The metrics for Cloud computing isfairly different from traditionalenterprise software.”Bessemer Venture Partners – Top 10 Laws for Cloud Computing
    19. 19. Metrics Matter
    20. 20.  Conventional ERP ERP + spreadsheets Roll your own Only captures data Still need good analyticsYou Really Need a System
    21. 21. Your Business ProcessesCRM ERP GL
    22. 22. Lots of VendorsAchdirect, Aria Systems, Ascenduregroup,Batchbill,, Billing Circle, Blusynergy,Cannibill, Chargebee, Chargify,Cheddargetter, ChickPea, Cloudability,,Evapt, Fusebill, Magnaquest, Metanga,Monexa, NetSuite, Paysimple, Recurly,Saasy, Zuora
    23. 23.  Subscription business model is here tostay Your customers see you as an expert You are going to need it as marketscontinue to shift Embracing it will help you grow yourbusiness Use case for analytics and metricsConclusions
    24. 24. Beagle Research Group, LLCwww.BeagleResearch.com781-297-0066Thanks!