#usage based subscription model

Introduction to subscription commerce industry

The subscription e-commerce market is seeing an exponential growth , by more than 100 percent a year over the past five years, says a report by McKinsey. This creates immense opportunities for companies that want to earn good profit from the sale of digital products and services on a recurring basis.

Companies in the subscription commerce industry can forecast cash flows and budget, reduce administrative costs, and drive better business outcomes. Buyers, on the other hand, benefit by planning their budget in advance because they get a consistent and recurring cost for as long as they are active subscribers.

Tools to automate the billing and management of your subscription-based digital products and services

Moving to a subscription-based model impacts every aspect of operations across the organization— from business processes and business rules to billing and payments. To make this transition successful, businesses need to improve the customer experience and get to market faster and also do it all without missing a beat. This where you can trust Subecob – an all-in-one cloud-based off-the-shelf solution that manages all aspects of a subscription-based business.

With Subecob, companies can maintain or improve competitive advantage—and deliver a unique customer experience by meeting a wide range of demands. Speed time to market with wide functional coverage to quickly set up subscription services.

List of subscription commerce industries served by Subecob

Media and entertainment

Subecob allows you to effectively manage and scale multiple subscriptions to address unique needs of customers interested in media and entertainment content. Automate anything in an instant. Cross-sell, up-sell products and services with confidence and maximize revenue.

Health and wellness

Launch new health and wellness products and services. Subecob entitles you to manage differing scenarios while keeping all compliances. Switch payment methods, bring new features, setup new integrations seamlessly in as few clicks as possible.

SaaS and cloud business

Record all data consumption. handle large volume of data and setup new rules. As a flexible billing platform, Subecob is all you want to keep in pace with the changing SaaS and cloud business. Prevent churn rate and grow, without writing a single line of code.

More industries –

Broadband and internet service providers

Automotive

Subecob is uniquely positioned to help startups and small businesses manage and optimize their subscription business with a host of features. Try our free plan for as long as you want and see the difference!

The subscription business is taking over other businesses at a phenomenal pace. But, as an owner, if you do not pay much attention to introduce some of the innovative ideas to engage your subscribers then the business is not for you. These days everything goes to personalization as boosting customer experience has become the main aim of the businesses. Customized services keep the audiences engaged and interested in business activities. The increased user engagement and retention into the subscription business has attracted a large number of new businesses across a range of verticals. Where the subscription services are increased to some percent, there are some businesses that have winded up from the industry due to lack of user engagement.

How to engage your subscribers through personalization?

Getting customer attention and holding it are two different important acts in the business. It is very important to retain the customer’s interest in the business by getting and implementing the recipe of personalization in the right way. The key is to constantly iterate by improving all the aspects of marketing strategy that are based on marketing opportunities and feedback data. Businesses that have started their growth into the subscription business model needs to identify how to engage their subscribers through personalization. Some of the ways to start with are mentioned below:

Know what customers really want: These day’s artificial intelligence and big data are readily available and highly useful. When these tools are used in tandem, they provide companies with customer vision that guide the customer interactions and keep services safe from falling short of expectations. Artificial intelligence boosted technology helps in streamlining all those friction points that are supporting subscription cancellation or negative Google reviews. By collecting data from historical data, customer feedback, social listening, and other means subscription service providers can build two-way trust and commitment. To lock your customer’s desires, trust is the end result.

Stop marketing to just millennial: All the users of the subscription business are equally important but that does not mean that all have the same taste and desires. So, never try to fit them all into one-size fit for all approach. Identify the big users on the basis of demographics to give them a personalized experience. It is crucial to understand your users by categories and not by generations. Yes, millennial is a big group but also remember that other generation and groups are also a part of your subscription services.

Create between the box touch points: To improve the retention rate of your subscribers, there is a need to build and foster a relationship with your subscribers for trust and goodwill. If the customer has signed up for a subscription, it is not necessary that he is going to stick around or you need to think out of the box for retaining customers by going beyond your service platform. Artificial intelligence insights can help you understand your customer’s buying behavior and other activities in the business. This helps you to take faster steps to save a customer when he or she is losing interest in your subscription services.

Making the most of mobile: These days, consumers want and respond to a dedicated mobile experience that fulfils their needs. Most of the subscription businesses are offering a devoted mobile experience along with their main website experience. Reaching your consumers through SMS and push notifications to keep them notified even of your latest information brings them closer to your subscription service. Asking your consumers for downloading the app to enjoy more activities and services from the company can help the business in taking care of their consumers in a better way.

Think beyond creepy marketing: Today’s digital platform has created an extraordinary user experience. Consumers need things on an instant basis but also one after another. They want to be engaged rather than stuffed. Consumers care for the product but more for the experience with the company. Tracking their activity by following their social media movements help brands in developing ways to keep the customer engaged in the subscription service.

You have a great product, and even a convincing number of paying customers who keep your business running annually, but your ARR is not growing.

You wonder what is wrong?

A competitor who started with you is growing by leaps and bounds, but your revenue is struck at a threshold, not moving by an inch.

Well, situations like this are common for SaaS-based businesses. Just when you think it’s a dead end, here’s good news – You can break the revenue barriers and grow your ARR to new heights, applying some common sense and timely strategies.

What are they? Let’s take a look!

Learn how to grow annual recurring revenue

Content of the article

What is annual recurring revenue?

ARR Vs. MRR

How to calculate ARR?

Benefits of calculating ARR

How to drive ARR growth?

Infographic – What is ARR and how to drive ARR revenue growth

Conclusion

FAQ

What is annual recurring revenue?

ARR is short for annual recurring revenue.

It’s a SaaS metric that’s used to measure the yearly recurring revenue from your customer’s recurring subscriptions.

Simply put, ARR helps measure how much revenue you can expect from customer subscription in a calendar year.

ARR is closely connected to MRR – which means monthly recurring revenue, although they share the duration differences.

ARR vs. MRR

Monthly recurring revenue is the total sum of income that you can expect to generate every month, whereas; ARR as noted above is about measuring the data yearly. So, there is the duration difference.

How to calculate annual recurring revenue?

Calculating ARR involves measuring several minute details, and the result can vary depending on factors such as your present pricing strategy, the nature and type and complexity of your product/service and business model. As your business scales, new factors may need to be introduced in the calculation.

Generally speaking, the ARR formula is this –

Annual Recurring Revenue (ARR) = (Total $ subscription cost Per Year + Recurring revenue from expansion, add-ons and/or upgrades) – Total $ revenue lost from cancellation of subscriptions.

Benefits of calculating annual recurring revenue (ARR) for SaaS business

Analyzing monthly recurring revenue provides a clear idea about monthly progress, but ARR gives you annualized data which sounds more sustainable and practical.

It helps you see the impact of decisions on a year-on-year basis.

It shows how well your business revenue compounds over time.

It allows you to make realistic predictions about your future revenue.

In other words, it allows businesses to understand the health of their subscription plan in a more realistic and genuine way. Every minute details, including customer churn rate, acquisition goals, impact of changes made in features and announcements can be mapped to a greater goal: Making better product that yields more revenue in future.

How to drive annual recurring revenue growth?

Here are some ways that may help in case you are struggling with generating enough revenue. Also note that every business is unique, and so are the chances of growth, therefore these solutions may not work in all cases and you need to adjust your subscription strategies based on your product, customer behavior, data and competition etc.

Revise price

If a product is under-priced, revising the price to a moderate level may drive growth in revenue. Of-course, how customers behave with the change and development need to be carefully inspected so that existing customers are not lost.

Split the features

Having all the features in one product is good, but most customers would not need all of them. You can split some of the features and sell them separately as add-ons and upgrades. Some customers would never need them, while some would be happy to pay some extra for the value provided. But splitting features should not make the product/service weak, otherwise it may earn negative consequences.

Revise unlimited offerings

Your product is not finished at one go. It revises and improves and with that, the features. As you add more features, your cost increases, similarly a customer probably needs to pay for the upgrades, rather than sticking to a fixed subscription. However, revising unlimited offerings needs careful research and calculating the risks beforehand is essential. Because some customers may have become habituated to the subscription and features, they may not want to accept changes.

Likewise, up-selling, retaining existing customers, convincing them to refer your product to others etc may help drive ARR growth.

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FAQs

What is ARR?

ARR is short for annual recurring revenue. It’s a SaaS metric that’s used to measure the yearly recurring revenue from your customer’s recurring subscriptions.

Which is important – ARR or MRR?

Both are essential. One provides monthly estimates; whereas the other gives yearly calculation

How to calculate ARR

Annual Recurring Revenue (ARR) = (Total $ subscription cost Per Year + Recurring revenue from expansion, add-ons and/or upgrades) – Total $ revenue lost from cancellation of subscriptions.

Conclusion

The Next Big Thing in Subscription Economy is Car

The subscription economy is here to stay. With changing consumer priorities in today’s evolving digital landscape, businesses need to align their objectives with customer needs or else they risk being forgotten.

Car subscription is fast making inroads to mainstream because of a number of associated benefits. With this blog, we cover different facets of car subscription and why it is the next big thing in subscription economy.

Car subscription takes guesswork out of car ownership; giving one complete power to choose desired vehicle for as long as he continues to pay recurring fee for the right to use the service. This makes a lot of sense.

The subscription business model along with the innovative business partners creates a “never-ending product”. The business demands creativity and productivity simultaneously and on a regular basis and that too is not affected by unhealthy peaks and troughs. It seems that a new kind of business model is leading the world. It is similar to the way people change for good, business needs to change by time.

Today’s world is highly digitalized and the evolving digital technology demands convenience over everything else. This is the main reason for the proliferating of e-commerce companies as it eliminates the buyer’s inconvenience of buying items over and over again. Along with convenience factor, these subscription business models offer cost-saving advantages to its users.