Moving to a Subscription Pricing Model? Here’s what to watch out for...
The Subscription Economy is here, and thriving. Gartner foresees that by 2023, 75% of organizations selling direct to consumers will offer subscription services. The will to migrate to subscription pricing models is evident in this EY global study of 700 tech companies, with more than 9 out of 10 having already made the move or considering doing so, including 12% that have completed it.
Vice President of Pricing and Licensing and Verint veteran, Rajeev Venkat is a powerhouse on how the holistic switch from the perpetual license model to the subscription model can be accomplished across business units and product lines. In the following commentary, as seen in author Ajit Ghuman’s book, Price To Scale, Rajeev highlights the importance of instrumentation & tracking, while making the transition.
Companies making the transition to a subscription model need to look at it from the product perspective, in terms of having tracking (usage) and support capabilities.
Provide customers with visibility, and also provide internal visibility to liaise with the customers. With the cloud, there is a perception of flexibility — buy 100 today, use 300 tomorrow. But your customer needs to be able to see it.
Your own company also needs visibility so that there is no revenue leakage. This needs to be taken care of from a product perspective. The systems need to be capable of handling all that flexibility via tracking and metering usage.
There will also be co-terming issues, like a customer buying 300 units today and then buying another 700 units four months later.
How do you quote more of that, so it doesn’t get too confusing for both sides?
For this, having the right billing systems to provide flexibility is essential, and it is equally important for the product tracking information to be able to feed into those billing systems so that finance does not struggle to collect.
You can sell a lot, but if you’re not able to collect from customers, it’s all doomed.
These are some things that companies need to watch out for, if they’re making the transition to subscription pricing.