preparing for the board room: subscription metrics (subscribed13)

Copyright © 2013 Deloi3e Consul7ng LLC. All rights reserved.

Making The Case for Subscrip5on Business Model with your Board of

Directors Andy Main

Global Customer Solutions Leader Deloitte Consulting LLP


In The Next 60 Minutes, You Are Going To Rethink How You Do Business With A Subscription Model and have a great story to take to your Board of Directors.


It’s Always Good To Show The Board That You Followed A Process.

Business Strategy

Business Results

Business Operations

What do we need to do to position our business operations?

Technology

What technology solutions and architectures do we need?

Organization

How should we structure our organization?

Issues What business problem are you trying to solve?

What is the business model?

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Now, Get the Attention of your Board! What is Subscription Business?

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Rather than selling products or services individually, a subscrip7on model sells periodic use which builds brand loyalty into a long term recurring revenue streams

Grow Revenue

Diversify Business

Cut Costs Improve Customer Sa5sfac5on


Then What Do You Say To Them? Tell Them Where To Chase The Money.

5

Chase The Money

Role of the Subscrip5on Model

Grow revenue

Enable scalability – Subscrip7on solu7ons increase total addressable market, leading to increased transac7on volumes to grow revenue.

Improve customer sa5sfac5on

Customer Targe5ng and Ease of Access – Subscrip7on solu7ons significantly increase customer sa7sfac7on as they are more flexible and configurable towards the specific needs of a customer and enterprise

Cut costs Costs – Leveraging Subscrip7on technology is also a key enabler to shiM CAPEX costs into OPEX cost

Accelerated 5me to market – Subscrip7on model enables the rapid development of solu7ons, that can be released to market in waves -‐ much shorter 7me to market for new business areas

Business Diversifica5on

Zuora’s Nine Keys to Subscrip5on Success


Continue To Make the Case It’s Great for our Business and for our Customers

+ Business Predictable and constant revenue stream Provides payment in advance Revenue stream from recurring subscriptions is considerably greater than the revenue from simple one-time purchase Higher average customer lifetime value, Greater potential for upselling and cross-selling

+ Customer Convenient by buying a product on a regular basis to save money and time. Shift CAPEX costs into OPEX cost Subscription pricing makes it easier to pay for expensive items, since it can be paid for over a period of time Access to communities with similar interests Ongoing product updates available in the subscription

Data Center Consolidation

Consolidate and standardize your data center and

network components

Virtualize

Moving produc5on applica5ons to efficient

capacity

Automate

Pre-‐provisioned plaMorms such as Applica5on Servers,

Web Servers

Platform

Host basic applica5ons, web applica5on, intranets, legacy

systems

Business Applications

Providing business applica5ons to

enterprise customers

A COMPANY WHO GOT IT RIGHT

§  # Users – Named / Concurrent

§  # Transac7ons / Type

§  # Hours §  # GBs

§  Square Feet § Kilowa3s Consumed

§  # Transac7ons managed §  # Calls, # Minutes

WHAT YOU CAN SUBCRIBE TO

Selling capacity Selling the pla_orm

Selling soMware/

solu7ons

SERVICES OFFERED

.


So You Think You Got Them? Start To Tell Them What is Different

7

BUY NOW SUBSCRIBE

Rela5onships (Long-‐term, adop7on, loyalty)

Sell Units

Fixed, SKU Based

One-‐Time Transac5ons

Backwards Looking Metrics

Flexible, Plan Based (Edi7ons, Bundles, Usage)

Recurring (upgrades, add-‐ons, renewals)

Forward Looking (ARR, MRR, Churn, Renewals)

Growth Model

Pricing Model

Commerce Model

Financial Model


Do you have evidence that customers will pay for our products/services via a subscrip7on model. What will

we sell this way and to whom?

Are we ready to move to the high-‐touch customer engagement model that goes with subscrip7on? How are you going to provide an acceptable cost to serve?

Can we accurately monitor, meter, rate and bill what has been consumed? Can we get to the lowest level of granularity to reflect that in our value proposi7on?

USAGE MANAGEMENT

PROVING VALUE

CUSTOMER ENGAGEMENT

VALUE PROPOSITION

What are the metrics and KPIs we need to keep an eye on?

Here’s the type of questions they’ll ask on Business Operations

YOU


Do you have evidence that customers will pay for our products/services via a subscrip7on model. What will

we sell this way and to whom?

VALUE PROPOSITION

Get Ready Sample Answers Subscription Model

•  Customers are demanding usage based pricing from us

•  We have tested this with our

customers

•  Our customers will pay upfront for the service on a monthly basis

•  We are offering bundles, configurable options, and tiered pricing

•  We have created a new subscription services delivery platform from a company called Zuora and it does everything from the subscription order to monthly billing and collecting from the customer


Can we accurately monitor, meter, rate and bill what has been consumed? Can we get to the lowest level of granularity to reflect that in our value proposi7on?

USAGE MANAGEMENT

Get Ready Sample Answers

Subscription Model •  Yes we can monitor usage vs. the limited

visibility we have of usage data •  We will collect usage metrics and unlike

today where we don’t know installed base, we will have full knowledge of how our customers use our products and services

•  We are doing usage based pricing on

different subscription plans to give our customers options – one time buys, by the user, by the minutes of consumption – we can get really granular


How are we going to manage our customer rela7onships with this Subscrip7on Model?

CUSTOMER ENGAGEMENT


SUBSCRIPTION MODEL

•  We’ve factored into our subscription pricing and margins, the additional cost in our contact centers to handle customer inquiries

•  Good news here is that the renewal

cycles generate net new opportunities, vs. our one-off services today that limit customer interaction

•  It frees up more selling time for net new customers

•  Unlike today, we will get early warning on

attrition based on usage trends and take actions to retain our customers

•  We are using social communities to have our customers talk to one another, share their stories on how they are getting value from our services– this will create longer term customer loyalty


PROVING VALUE

What are the metrics and KPIs we need to keep an eye on?


SUBSCRIPTION MODEL

This is going be very healthy for our business: Improved Forecast Accuracy Increase Total Addressable Market and New Customers Increase In Length and Profitability of Customers Relationships Increase in Annual Recurring Revenues Increase in deals At or Above Margin Thresholds Reduced SG&A as % of Revenue Faster Quote Turn-A-Round Time Vastly Improved Cash Conversion Cycle


Technology Architecture Show Them How You Are Mixing Clouds To Do All Of This

PaaS based cloud integra7on layer delivering middleware and API connec7vity between the components of the proposed cloud solu7on vendors.

Campaign Management

Contracts, Configure, Price, Quote

Order and Subscrip7on Management

Invoicing & Billing

Sales, Service, Marke7ng, Custom Apps

Sales Social Business

Customer & Partner Portal

Cloud Glue The stack bundles pla_orm independent leading SaaS applica7ons providing complemen7ng capabili7es

Sales Planning & Compensa7on

Human Resource

Salesforce.com is the leading provider to act as hub for cloud-‐based opera7ons.

Service Marke5ng

Force.com and App Exchange

Social Business

CLOUD MIX TM

Zuora as the leading provider of Subscrip7on Management Solu7ons


Organizational Change Is Everyone Ready To Do This?

•  Is everyone lined up and ready to go? Employees need to know how they contribute to the Subscription Business Model

•  Leadership challenge is to get everyone headed in the same direction, with a shared purpose

The ultimate proof is seen in employees actions

Subscrip5on Model Business Readiness Playbook

Develop metrics to gauge adoption and benefits of how the business is trending

Adjust/develop business processes to fully utilize the underlying Subscription Model technologies

The buy-in activities to secure support for the Subscription Model

Business Value and Measurement

Business Processes and Systems

Deliver information to employees, set goals, set roles, and train people on how to run the Subscription business

Organization Readiness, Communication and Training

Leadership Alignment and Stakeholder Enrollment


What To Do Next…

Hope you Took Good Notes…

Give it a Shot!

Contact Andy Main for advice or help. [email protected]

1 2 3

Preparing for the Board Room: Subscription Metrics

Pete Khanna CEO

Agenda

TrackVia Overview

Connecting the Dots

4 Key Essentials in the Subscription Economy

Wrap Up & QA

TrackVia Overview

Big Picture

Culture People

1 2 Growth

4 Capital

3

The Nine Keys to Subscription Success

$

PRICE ACQUIRE BILL COLLECT

NURTURE ACCOUNT MEASURE ITERATE SCALE

ACQUIRE NURTURE MEASURE ITERATE

Foundation Building S u b s c r i p t i o n S y s t e m s

Business Alignment

Flexibility Customer Focused

Predictability

Success Cycle Vision

Reality

React

Scale

You Can’t Make Bricks without Clay Engagement

Rate Conversion

Rate Cohort Growth CAC

Payback

Customer Feedback

LTV Renewal Rate Feature

Usage

LTV/CAC

Churn % UV to Trials

Grow

th

Time

Compe77on

Organic Growth Rate

Connect the Dots

Grow

th

Time

Summary

Measure React

Innovate Scale

Operating DNA

Product Mentality

Inclusive Proactive

Q&A

Thank You!

preparing for the board room: subscription metrics (subscribed13)

Business

subscription business

business cutcosts

business model

business problem

customer convenient

subscription model

board of directors

advance revenue stream