1

Supporting the Transition to Subscription

2

Brian BellChief Marketing Officer

Amy KonaryVP of Research

Joe AndrewsSr. Director, Product Marketing

Moderator Featured Guests:

3

1

2

3

Table of Contents

Industry TrendsExpansion of the Subscription Economy

Subscription Business ModelShift Focus from Products to Relationships

Best PracticesPricing and Packaging Secrets, Key Metrics

Apr 18, 2023

© 2012 IDC 4

Subscription Highlights

Source: IDC, 2012

57% of the top 100 software vendors worldwide by revenue had subscription revenue in 2012.

For 16% of the top 100 software vendors worldwide, subscription represents greater than 50% of total software revenue.

For the top 25 software companies (with subscription), subscription revenue grew an average of 17% from 2010 to 2011

5 5

Dollar Shave Club

Razors

Wonder Sitter

Baby Sitting

Babbaco

Kids Toys/Activities

Rent the Runway

Women’s Dresses

Bespoke Post

Luxury Items

Mystery Tackle Box

Fishing

Spice Guides

Date Idea

Spotify

Music

Businesses Can Subscribe To Anything

Test Tube

Beauty Samples

Workday

HR

Google Apps

Apps

Amazon

Infrastructure

Zendesk

Helpdesk

Intacct

GL

RingCentral

Phone System

Concur

Travel/Expense

Salesforce

CRM

ServCorp

Virtual Office

Consumers Can Subscribe To Anything

6

This is the

6

1999 Today

Subscription Economy

BUY NOW SUBSCRIBE

7

Moving to Subscription Requires a Change of Focus

Apr 18, 2023

© 2012 IDC 88

Focus on RelationshipsFocus on Relationships

Features and functions are only part of the experience

Key: Build Substantive Relationships; Monetize the Relationship

Transparency and Communication

Commitment to doing what is right for the customer, even if it means a smaller deal size

SUBSCRIPTION

Relationship Status: “It’s Complicated”

9 9

The Foundational Elements Necessary To Support The Subscription Business

Model

Subscription Order Management

Back Office Scalability

B2Any Commerce

Pricing Agility Subscription Metrics

10 10

But Your Existing Systems Don’t Support The Subscription Business

Model

ERP Homegrown SystemsSimple E-Comm

Subscription Order Management

Back Office Scalability

B2Any Commerce

Pricing Agility Subscription Metrics

11 11

Relationship Business Management: Built to Support The Subscription Business

Model

Subscription Order Management

Back Office Scalability

B2Any Commerce

Pricing Agility Subscription Metrics

“Companies that are looking to move beyond spreadsheets, and position their subscription businesses for future growth and flexibility, should consider solutions such as those provided by Zuora” Amy Konary, VP of Research, IDC

12

Best Practice:Fine Tune your Pricing and

Packaging Strategies

Apr 18, 2023

© 2012 IDC 1313

Focus on Pricing and PackagingFocus on Pricing and Packaging

As business strategy changes, pricing strategy should also

Usage, Freemium, Trials, Promotions

Transparency! Don’t hide your pricing page, or require a conversation with the prospect to explain your framework

It can’t take “forever” to get pricing done

Apr 18, 2023

© 2012 IDC

Pricing and PackagingPricing and Packaging

14

DEFINE

IMPLEMENT

MEASURE

ITERATE

Analyze “Huge bubble of

new accounts, but significant increase in churn.”

Product Plans Entitlements Marketing

Conversion Churn Rate Revenue

What are you trying to do? “2 months free for new

customers”

 ”It’s all about putting a number on the wall and your setting goals and checking back on it.”

15

Strategy #1: Multiple Edition Strategy

Multiple editions for different audiences.

16

Strategy #2: Promotional Strategies

Start with a free trial.

Offer:2-months

free

17

Strategy #3: Freemium Strategy

18

Best Practice:Key Subscription Metrics

19

Traditional Income Statements are One-timed Focused (Product Sale) Focused

Traditional income statements do not differentiate one-time from recurring revenue or expenses.

20

Subscription Economy Income Statement

ARR $100 Churn (10)Net ARR 90 COGS (20) G&A (10) R&D (20)Recurring Profit 40

Growth (40) Net New ARR 40 Ending ARR $130

Retention Rate

GrowthEfficiency Index

Recurring Profit Margin

21

When looking at a Subscription Economy company, only these 3 metrics matter

ARR less Churn less Non-Growth

Spend

Recurring Profit Margin

How much of your ARR you

keep every year.

How much does it cost you to acquire $1 of

ACV

RetentionRate

Growth Efficiency

The metrics for Cloud computing is fairly different from traditional enterprise software. Top 10 Laws for Cloud Computing

Apr 18, 2023

© 2012 IDC

Pay Attention ToPay Attention To

22

1. 2.

3.

23

1

2

3

(1) Focus on sustaining high Retention Rates

“How much ARR you keep every year”

Make Renewals Really Easy Auto-Renewals, Early Bird Renewal Incentives

Enable Your CSRs to Renew CustomersChurn defense, ARR preservation

Prevent Churn with New Price Plans Monthly vs. Annual, Discounted, Lower Tiers

24

1

2

3

(2) Maximize your Recurring Profit Margins

“How do you cost effectively service the base”

Take Credit Card Payments No touch, bring cash in the door immediately

Automate Quote-to-Cash-to-Renewals Seamless, eliminate manual errors

Drive Multi-Year Commitments Multi-Year Pricing Tiers, Term Discounts

25

Tune Your Pricing Strategies Freemium, Editions, Pay-as-you-Go, Tiers 1

2

3

(3) Optimize your business for Growth Efficiency

“How much does it cost you to acquire a $ of ACV”

Increase Total Customer Value Upsells, Cross-Sells, Add-ons

Make Doing Business Simple Self-Service, Promotions, Free Trials

26

q & a

27

Thank You!