Pivoting to a subscription business model? How to get it right.

Subscription-based business models are the current business trend, and it’s easy to understand why.

There are many advantages to managing subscriptions versus selling products. A captive clientele and a steady, elevated revenue stream are only two of the most obvious.

While the benefits of the subscription model can be significant, the challenges of transforming an organization from a sales culture to a service culture can be equally daunting.

In our recent Subscription Management Revenue Models webcast, my colleague Achinta Khairom, Oracle CPQ Cloud Strategy Architect Arthur Carlucci, and I shared our points of view on the evolution of the subscription environment.

We looked at the trends propelling the movement—from savvier customers to regulatory challenges to economic factors—and the significant opportunities for companies in becoming subscription-based organizations. We also discussed the often-overlooked issues that can undercut efforts when implementing transformative change.

Cultivate a customer-centric universe

The key to subscription success is a flawless customer experience. That means engaging with the customer at every touchpoint in the cycle—and doing it in the ways they prefer. Competition is fierce, and a dissatisfied consumer can easily go elsewhere.

Cultivating the customer relationship demands company-wide commitment. It may also require a completely reimagined end-to-end operating model to deliver value to shareholders. Only digital technology has the power to align all aspects of a subscription business, from strategy and data analysis to operations and KPIs. A digital platform links front office, middle office, and back office seamlessly. It has the capability to provide all parties with access to the same information in real time.

The subscription business isn’t about selling one product. It’s about building customer relationships that allow you to sell bundles of products and services over a long period of time. Your platform should be structured toward this end: comprehensive, connected, and intelligent

The six focus areas

A platform for today’s evolving subscription business must cover six functional areas. Each should be programmed with the capabilities to handle the specialized tasks assigned to its sphere of responsibilities:

1. Product and pricing

• Helps sell bundled products and services in combination, and handles both fixed- and usage-based pricing
• Manages offerings by customer type, geography, and other dimensions and tracks customer usage

2. Customer experience and sales operations

• Facilitates self-service buying and enables configurable offerings, “try and buy,” “freemiums,” and more
• Performs credit checks, verifies customer eligibility, and handles contract authoring and approvals

3. Business operations

• Manages full operations spectrum: fulfillment/activation, installation of complex products, customer service, support and maintenance, usage data collection
• Oversees procurement/supply chain

4. Billing and revenue recognition

• Captures consumption/usage data to prevent revenue leakage
• Presents detailed bills at customer’s preferred schedule and manages disputes and claims
• Recognizes and reports revenue per ASC 606 Revenue Recognition standard

5. Tax

• Computes rate and tax type by product/service, usage purpose and jurisdiction to determine correct tax liability
• Handles tax rate variations based on origin, transit, and destination of product or service; also determines sales exemptions

6. Enterprise performance management/analytics

• Provides planning and budgeting guidance and forecasts revenue, expenses, and resources and capacity required
• Provides subscription-business analytics (ARR, MRR, Churn, TCV, cost to serve) and leverages them to upsell, cross sell, and improve the customer experience

The subscription-based future

The steps that individual companies need to take to ready themselves for a subscription-based future will vary.

A traditional business moving to a subscription model will have different challenges than an organization seeking to carve out a subscription niche for a new product or service. A company needing to modernize its existing digital platform may already have an expandable system in place. And because of the complexities involved, a startup may have an easier time establishing itself as a subscription-only firm than a traditionally-focused company that must execute a significant transformation.

Many organizations will find they need a digitally enabled platform to handle the multitude of variables that constitute subscription-based business. Using artificial intelligence, machine learning, and similar technologies that automate processes throughout, digital technology—such as that implemented by KPMG and Oracle—helps you manage your subscription portfolios for maximum profitability.

The opportunity in subscription services is there, and we believe the payoff is well worth the effort.

Watch the complete webinar and learn how Oracle Subscription Management services can improve your business.

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