Success In The Subscription Economy - Brian Bell, CMO of Zuora

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Success In The Subscription Economy - Brian Bell, CMO of Zuora

  1. 1. Success in the Subscription Economy: Relationship-driven Businesses BRIAN BELL CHIEF MARKETING OFFICER, ZUORA February 20131
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  3. 3. What is the Subscription Economy? BUY NOW SUBSCRIBE 1999 Today By 2015, 35% of Global 2000 companies will generate revenue through subscription-based services and revenue models.3 3
  4. 4. Consumers Are Embracing The Subscription Economy • Movies - $5/month (Netflix) • Bikes - $10/month (Capital Bikes) • Music - $5/month (spotify) • Car - $30/month (zipcar) • Designer ties - $11/month (Tie Society) • Toys for Kids - $23/month (Spark Box) • Convenience – PRICELESS! SUBSCRIBE “This movement is inadvertently creating a new economic engine that has the potential to reorganize our economy” Sarah Horowitz, The Atlantic4
  5. 5. The Tech Industry is Embracing The SubscriptionEconomy SUBSCRIBE “The global market for SaaS will grow from $21.2 billion in 2011 to more than $92.8 billion in 2016”5 Forrester
  6. 6. The Media Industry is Embracing The Subscription Economy SUBSCRIBE “By 2015, more than 40% of media and digital products companies around the world will use subscription services for their fulfillment, billing and renewals” Gartner6
  7. 7. On Premise Giants Are Buying Their Way Into The Subscription Economy To be replaced with a paid image IBM acquires DemandTec SUBSCRIBE SAP pays $3.4Bn for SuccessFactors Oracle pays $1.4Bn for RightNow HP takes on Amazon’s cloud services “Software giants face tough choices as their core businesses come under attack from pure SaaS players” Peter Golmacher, Cowen Group7
  8. 8. Businesses Can Consumers Can Subscribe To Anything Subscribe To Anything ServCorp Google Apps Salesforce Test Tube Wonder Sitter Spotify Virtual Office Apps CRM Beauty Samples Baby Sitting Music Zendesk Amazon RingCentral Rent the Babbaco Mystery Tackle Runway Box Helpdesk Infrastructure Phone System Women’s Kids Fishing Dresses Toys/Activities Dollar Rubber Bespoke Spice Workday Intacct Concur Post Club Guides HR GL Travel/Expense Condoms Luxury Items Date Idea8 8
  9. 9. Why the Subscription Economy ? Technology Demand Business Model Smart Money Trends Subscribe9
  10. 10. The Subscription Economy Requires a Completely Different Approach to Building Businesses Product Economy Subscription Economy Sell Units Monetizing Customer Relationships Pay-as-you-Go Pricing Plans Price Per Unit This image cannot currently be displayed. One-Time Orders Multiple Orders Over a Lifetime Forced to Pick a B2Any: Sell to Consumers & Customer Segment Businesses Complex, Interrelated Bookings, Simple Financial Metrics Billings, & Revenue10
  11. 11. The New Worldhasm The Old World11
  12. 12. Business Leaders Struggle With The Limitations Of Existing Systems Why Can’t I Make My Processes Why is it so hard Why Can’t I Find FLOW to GROW my What I Need to business KNOW VP of COO CFO12 GM Sales
  13. 13. The Strategies Required to Grow a Subscription Business are Very Different13
  14. 14. The Subscription Business Model Is Based Upon Long Term Recurring Relationships Increase the Value of Your Relationships Acquire New Maintain Relationships Relationships14
  15. 15. Pricing & Packaging Strategies Drive Growth Packaging & Pricing Acquire New Increase Value Reduce Churn Strategy Customers Per Customer Launch First Product X Add-on Options X Monthly vs Annual X X X Options Higher Editions X X Lower Editions X X Product Bundles X Pricing Tiers X X Usage & Overage X X X Multiple Currencies X X Renewals X Pricing Changes X X15 Regional Pricing X
  16. 16. The Processes Required to Make a Subscription Business Flow are Very Different16
  17. 17. Product Business Commerce Billing Finance Book Order Invoice & Recognize & Ship It Collect For It It17
  18. 18. Subscription Business Quote-To-Cash Renewals Payment Failures Account Suspension Amendments Account Management18
  19. 19. Subscription Business Billing Commerce Finance19
  20. 20. What you Need to Know with a Subscription Business Model is Very Different20
  21. 21. Traditional Income Statement21
  22. 22. Revenue ARR $100 $022
  23. 23. Subscription Economy Income Statement ARR $100 Churn (10) Retention Rate Net ARR 90 COGS (20) G&A (10) R&D (20) Recurring Profit 40 Recurring Profit Margin Growth (40) Growth Net New ARR 40 Efficiency Index Ending ARR $13023
  24. 24. The Three Key Metrics of the Subscription Economy Retention Recurring Growth Rate Profit Margin Efficiency How much of ARR less Churn How much does your ARR you less Non-Growth it cost you to keep every year. Spend acquire $1 of ACV The metrics for Cloud computing is fairly different “ from traditional enterprise software. ” Bessemer Venture Partners – Top 10 Laws for Cloud Computing24
  25. 25. But how do you run a customer focused company… …with systems meant for the old world?25
  26. 26. Your Systems Today CRM ERP GL26
  27. 27. I Need a System That Helps me Grow , Flow and Know in the Subscription Economy27
  28. 28. An Integrated Relationship Business Management System Billing Service Rating & Billing Billing Ops Commerce Secure PCI Payments Billing & Payments History Billing Consolidation Taxation Payment lifecycle mgmt Product Marketing Subscription Service Catalog Flexible Pricing Models Multi Channel Commerce Accounting Periods Cross and Upselling Accounting Close Subscriber Renewals Finance Revenue Recognition Aging Balances Subscription Metrics Reporting Accounting & Finance28
  29. 29. Plugs Into Your CRM and GL29
  30. 30. Z-Business Helps You Grow, Flow and Know Our Mission: Help you succeed in the Subscription Economy GROW: FLOW: KNOW: Build and grow your Run and flow your Have the right metrics to subscription business subscription business optimize your and revenue. processes efficiently. subscription business.30
  31. 31. W A S H N N G TY ON K . C . I EW O R D R i t z C a r l t o n B u c k h e a d , AT L A N TA March 6, 2013 5-9pm EST http://www.subscribed.com/at.html31
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