Lessons Learned When Monetizing Subscription Services
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The document discusses key lessons and strategies for monetizing subscription services, focusing on designing growth journeys, selecting pricing variables, and maintaining innovation. It highlights the importance of upsell revenue and suggests a framework for packaging that aligns with customer needs and promotes effective value metrics. Additionally, it emphasizes the need for a continuous innovation cycle in pricing and packaging to avoid erosion of value differentiation.
Lessons Learned When Monetizing Subscription Services
- 1. Lessons Learned When Monetizing Subscription Services Monika Saha : VP Product Marketing, Zuora
- 2. Topic Lessons, Observations & Suggestions - 30 mins ○ Designing growth journeys ○ Selecting pricing variables ○ Maintaining a healthy pace of innovation Audience Q/A - 15 mins Agenda
- 3. Lessons, observations, suggestions when designing pricing and packaging 01Designing “growth journeys” 02Single vs. multiple value metrics 03Maintaining a healthy pace of innovation
- 4. Healthy upsell revenue is critical to growth % of bookings from upsells Source: 2016 Pacific Crest SAAS survey Cost of new business vs. upsell, expansion, renewals
- 5. Challenge : Balancing acquisition vs. lifetime value B2B Pressure to meet quotas Higher bookings numbers Lower net dollar retention B2C “Blind” discounts/pro motions acquire a high volume of subscribers Higher subscriber growth rates Lower post- promotion retention
- 6. Suggestion: Design for 2 factors to drive upsells/expansion Current ARR/M RR Capability driven growth levers Consumptio n driven growth levers New ARR/M RR a.Capability-driven: The need for an expanded set of product capabilities (cross/upsell) a.Consumption Driven: Higher use and adoption of a base set of capabilities that a customer has bought (add-on)
- 7. Suggested packaging framework EDGE NEEDS Identify new capabilities customers may want as their needs begin to extend beyond baseline needs of their profile Map this to baseline packages Map this to capability driven growth (tipping points, cross/up sells) Map this to consumption driven growth (add-ons) COMMON NEEDS Define the most common pricing profiles and the “baseline needs” of those profiles ADOPTION SIGNALS Identify signals that indicate higher adoption of the same set of capabilities over time ⇊ optimal packaging
- 8. Challenge : maintaining compelling “tipping points” Benefit A $10 Benefit B $5 Add-On Creep Weak Tipping Point Benefit A Benefit B Benefit C GOLD PLAN $150/user/yr BRONZE PLAN $100/user/y r Compelling Tipping Point BRONZE PLAN $100/user/y r GOLD PLAN $150/user/yr Benefit A Benefit B Benefit C You might start here …. But over time you could end up here ….
- 9. Suggestion: carefully consider the “value-optics” of add-ons Benefit A Benefit B Benefit C GOLD PLAN $150/user/yr BRONZE PLAN $100/user/yr (A + B) $50Tipping point advantage This solves for a need to offer add-ons A & B with the bronze plan, without eroding the price-value tipping point of the Gold Plan
- 10. Lessons, observations, suggestions when designing pricing and packaging 01Designing “growth journeys” 02Single vs. multiple value metrics 03Maintaining a healthy pace of innovation
- 11. We are seeing an increasing number of value metrics Source: 2016 Pacific Crest SAAS survey
- 12. Challenge : selecting a value metric for complex, mature, cross-departmental products You might be leaving money on the table Buyers will have a hard time aligning price to value delivered ✕ ✕ A single value metric is ideal, but sometimes not every product innovation will map to this value metric Without the right value metric:
- 13. Value Metric : # Of Sales Users 100M 10M 1M CFO Value : Transactions automated VP Sales Value : Quotes streamlined for users Suggestion: map one value metric per persona Value metric : transaction volume
- 14. Lessons, observations, suggestions when designing pricing and packaging 01Designing “growth journeys” 02Single vs. multiple value metrics 03Maintaining a healthy pace of innovation
- 15. Challenge : keeping up with a continuous innovation cycle Over-loaded add-ons Eroded price-value differentiation ✕ ✕ Pricing/Packaging decisions have to be made at a faster, more frequent pace The pitfalls of not aligning the pace of pricing/packaging innovation with product innovation:
- 16. Suggestion: create an innovation alignment framework PRIMARY PRICING GOAL Product Innovation Benefits Competitive play Reduce sales/acquisiti on friction Generate new business revenue Generate upsell/expansi on revenue Increase package differentiation Benefit name 1 + Benefit name 2 + Benefit name 3 + Benefit name 4 + Benefit name 5 + Force yourself and your primary stakeholders to attach ONE primary pricing goal to each benefit
- 17. Check out Zuora for more great presentations, guides, podcasts, and our award-winning magazine Subscribed. All the info you need to build and run an amazing subscription business. www.zuora.com/academy