Why subscription models are your company’s future… and how to embrace it!

Over the past few years the idea of ownership as the only method of consuming is changing. Whether its cars, runway fashion, food, make up, tech services, hardware, you name it and it is becoming a recurring purchase vs. a one time purchase. As we know, this subscription model owes its success to the optimal balance of value it provides to both the company and the customer. For consumers, it’s the convenience, freedom to change, lower investment and hassle-free post purchase service with an option for auto renewals. Subscription offers them more choice and freedom to consume goods and services on their own terms. And for enterprises, the value of a subscription is the ability to predict revenue through recurring sales. In today’s economy, it's not about selling to the customer, but monetizing an ongoing relationship.

This consistency in revenue also allows subscription-based companies to easily calculate the lifetime value of a customer, manage inventory, offer simple pricing and many other benefits such as:

1. Flexibility and scalability: You can plan resources and predict revenue. It helps you scale, adapt and change as per customer needs. Businesses don’thave to worry about scaling work up or down because the business is more predictable.

2. Enhances longevity of the customer relationship: Recurring revenue models lead to higher revenues and  stronger customer relationships. These models help gain customer trust and loyalty and result in deeper consumer insights from recurring behavior. Through subscriptions, customers become more valuable the longer they use the product or service, resulting in increased average customer lifetime value.

3. A promise of growth: The steady stream of predictable income, evaluated against churn rates and operating costs, ensures the growth you project is sustainable. With the right knowledge, the growing customer base will not overload your infrastructure. A recent survey establishes that subscription-based businesses grow revenue at a minimum of 9%, compared with the S&P 500, and 28% year-on-year growth.

But as companies embrace recurring-revenue business models, the pressure to accommodate greater billing volume and complexity will only grow. One way for finance to respond to the challenge is to adopt best practices and technologies that integrate, automate, and streamline invoicing/billing processes. This strategy can yield important benefits, including faster billing cycles, greater team efficiency, increased customer satisfaction, and greater insights to improve and extend revenue streams in the long-term. Companies must manage many challenges: accommodating new business models, scaling to higher transaction volumes, keeping up with complicated contractual terms, supporting the sales organization’s creative pricing structureand new compliance requirements. The faster pace of business means that legacy accounting systems and spreadsheet analysis can no longer reliably keep up.

However, there are complex challenges these organizations face as they shift from traditional business models to recurring revenue models. Some of them being:

• Flexible billing
• Automatic invoicing
• Partner commissions
• Data integrity

To address these issues RecVue’s founders built the only enterprise monetization platform based on big data and powered by Oracle’s cloud infrastructure that helps global enterprises adopt and manage innovative business models to drive recurring revenue growth.

RecVue’s customers are mastering hybrid subscription and high-volume usage-based models with sophisticated pricing and rating scenarios, while gaining operational efficiencies, expanding footprint and exceeding their customer expectations.

For instance, one customer, World Wide Technology (WWT), is a technology solution provider with more than $11 billion in annual revenue that provides digital strategy, innovative technology and supply chain solutions to large public and private organizations around the globe. WWT is investing in next generation platforms, like RecVue, to drive their transformation to a services-based solution provider.

Some of the challenges it faced were:

• Customer invoices being delayed up to four months because the legacy financial systems were unable to support a recurring revenue business model
• The team had to manually review contract documents to determine the appropriate prices and other terms to apply to the billable transactions
• Partner payments were also delayed because of the manual processes
• Inability to forecast revenue or determine the profitability of their contracts

These issues had a negative impact on cash flow, customer satisfaction, and partner relationships.

After WWT implemented RecVue’s monetization platform to automate contracts, collect and mediate usage data, deploy agile billing, and calculate payments to their partners:

• The billing team now produces invoices within 1-3 days, rather than 120 days, which is a 94% improvement
• 90% less manual intervention. Since the people in other teams, such as sales, customer service, and accounts receivable, are no longer involved in the billing process, they can focus on growing the business
• Partner relationships have improved since they are paid on time
• Finally, with RecVue, WWT now conducts month-to-month forecasting and understands the profitability of all contracts they are managing and can serve the needs of their customers better

Now with the right recurring billing and monetization platform, enterprises are able to embrace business growth by being able to more accurately forecast consumer needs, purchase patterns and recurring revenue. The ability to bring new services to customers more efficiently is taking these businesses to new heights!

Reach out to us today for a subscription billing and recurring revenue management assessment!