Subscribed 2016: Monetizing Subscription Services

Monetizing Subscription Services

welcomemeet today’s panel

Mac KernVP Commercial

PlanningSurfAir

@mackenziekern

Kyle ChristensenVP Marketing

Invoca@kylechristense

Monika Saha

VP MarketingZuora

@monikasaha

Madhavan Ramanujam

Partner & Board Member

Simon-Kucher Partners

3 principles to follow when designing pricing (5 mins)Challenges, Observations and Suggestions (30 mins)

o Monika Saha (10 mins)o Kyle Christensen (10 mins)o Mac Kern (10 mins)

Advice, Commentary, Questions (15 mins)

o Madhavan Ramanujam

3 principlesto follow when designing your pricing

Keep things simple and intuitive

Create a “growth journey”

Single vs multiple pricing levers

Challenges, Observations, Suggestions

Single vs multiple pricing variables

challenge: keeping up with a continuous innovation cycle

The new release debatePricing/Packaging decisions have to be made at a faster, more frequent pace

observation: the pitfallsof not managing pricing against this cycle

Overloaded add-ons

Eroded price-value differentiation

suggestion: create a new release alignment framework

PRIMARY PRICING GOALCapability

nameCompetitive

playReduce

sales frictionGenerate new ACV

Generate upsell ACV

Edition differentiatio

nCapability name 1 + + + +Capability name 2 + + + +Capability name 3 - + + +Capability name 4 - - + +

challenge: breadth of footprint and diversity of buyers

Over time, your product will evolve You will grow your product footprint and you might serve a new set of different buyers and markets

observation: a single pricing lever is idealbut not every product innovation will map to this lever

Leave money on the table

Buyers will have a hard time aligning price to value delivered

suggestion: one lever/variable per persona

# Of Sales Quote Users$100M

$10M $1

CFO : Transactions processed

VP Sales : Users Creating Sales Quotes

challenge: too much emphasis on maximizing the first transaction

Your goal should be to maximize lifetime valuePackaging should take into account what a customers needs are at the beginning of their journey, and how those needs might grow and change as they adopt and use more of your product

observation: the lack of logical “tipping points” will hampers upsell growth

High adoption, but zero/no upsell revenue

New innovation, but zero/no add-on revenue

suggestion: design a growth journey that feels natural and logical

Base Product

Capability driven add-on

Adoption driven upsell

A higher level

package

Pay for increasing

level of value

delivered

Base Product

Capability driven add-on

Adoption driven upsell

Kyle ChristensenVP Marketing

Invoca@kylechristense

challenge:

observation: Your company is naturally inclined towards increasing pricing complexity.

Product/Engineering:

“We spent 6 months on this, how are we going to make money on it?”

Sales:

“We need more stuff to sell!”

suggestion:

Customer’s Value

Customer Usage

HIGHLOW

Include in EditionPackage as Option

Table StakesDon’t Build this Stuff

challenge: How do you decide?

Calls vs. Minutes vs. Numbers

observation: it’s easy to fall back on “cost plus” pricing

“Anonymous Competitor”

suggestion: always align to value.

Example: Phone Numbers

Example: Minutes 90% < 10 min

MinutesNumbers

suggestion: consider different buyer types

MinutesNumbers

challenge:

How do we drive 1/3rd of bookings from existing customers?

observation: not every customer cohort grows in the same way.

COHORT A: Call Volume COHORT B: Call Volume

suggestion: Identify multiple paths to growth

CALL VOLUME

EDITION UPGRADES

ADD-ON OPTIONS

Mac KernVP Commercial

PlanningSurfAir

@mackenziekern

challenge: appeal to a wider target audience

The pressure to diversifyWe all want to keep products simple and easy to convey to consumers. But what if your original product offering doesn’t fit the growing and increasingly varied target market your company is trying to address?

observation: product diversification can lead to a loss of focus and abandonment of core principles

Too many products confuse the value proposition

Loss of understanding of core target market

Core product and pricing principles are neglected

suggestion: understand the new target audience and address them while keeping core principles intact

Know what makes you great, then expandBefore introducing new products or uprooting an existing pricing model, understand what is working well and identify ways to address a new audience by iterating off that solid foundation.

challenge: defining value for the consumer

Pricing that doesn’t confuse the value propositionProducts and services often offer multiple benefits, but creating pricing pathways for each can be overwhelming for the consumer and difficult for a sales team to explain.

observation: primary mistakes in pricing variable selection

Too many pricing variables

Focus on the wrong pricing variable

suggestion: identify the primary relationship between value and price

Directly relate consumer experience and pricing variablesPlace a high level of importance on understanding how consumers understand and utilize product. When pricing variables are directly related to the consumer experience, portraying value becomes much simpler and more effective.

challenge: creating a pathway to long-term membership

Interested lead to loyal subscriberSubscriptions, more than one-time transactions, require a greater level of initial commitment from the consumer. How can product and pricing tactics encourage a prospective customer to become a life-long subscriber?

observation: weak product and pricing focused on subscriber acquisition and retention have consequences

Slow subscriber growth

Increased dissatisfaction and subscriber churn

Limited continued engagement and upsell interest

✕✕✕

suggestion: offer unique introductory experiences with options for future growth

Product and pricing builds a lasting subscriber relationship Create opportunities to introduce brand and service value, then provide enhancements once a subscriber is stablished.

Madhavan Ramanujam

Partner & Board Member

Simon-Kucher Partners

madhavan ramanujamPartner and board member @ simon-kucher partners

Advice, Commentary, Suggestions

Check out Zuora Academy for more great info and actionable advice.

All the info you need to build and run an amazing subscription business.

https://www.zuora.com/academy/

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