Recurring Revenue: Subscription business is big business.
As a source of ongoing and reliable income (versus one-off or impulse transactions), recurring revenue offers a degree of predictability and security. This type of revenue can be realised in a number of ways – from long term, multi-year contracts, to monthly subscription services and membership clubs. Recurring revenue models are often associated with modern day disruptors who move from offering a free service to subscription pricing models as well as SaaS businesses combining cloud based software with monthly or annual pricing models. However, recurring revenue has in fact been around for a very long time – with early examples from several hundred years ago such as newspapers and periodicals. And, in modern times, the products you can buy diversify by the day – bacon, slime and chicken treats are just a few of the wackier examples we’ve come across recently!
But while the recurring revenue model drives income, improves financial predictability and offers a better buying experience, it also brings with it some operational challenges. Two common challenges that we see are:
Visibility, completeness and availability of data.
To be successful, you must really know your customers. What are they buying? Why are they buying? Do they get value/enjoyment from it? Many businesses lack the availability of a 360-degree view of their customers that helps to deliver this insight. Different customer data points live in different systems and information is siloed across teams and departments – making it impossible to really understand customer buying habits, preferences and behaviour.
The Ability to Scale.
A recurring revenue business model business does come with some risk in the form of customer churn and attrition. If selling new subscriptions fails exceed your rate of customer attrition and any upsell then the financial consequences can be disastrous. To avoid this how do you ensure the quality of your customer experience remains high? How do you improve engagement, renewals, repeats and referrals? How can you increase adoption and reduce attrition?
What you need to succeed.
1. A 360 Degree View of the Customer.
An integrated CRM platform that can provide that “single view of a customer” is critical for delivering insights into a recurring revenue business. With Salesforce, companies can access data from different teams, departments and regions to get a full picture of all customer relationships, trends, buying patterns and more. This single platform helps to give you a complete picture through delivering a single source of truth across every team that’s involved in a sale or renewal.
2. Proactively Support the Renewal process.. early and often..
“The probability of selling to a happy customer is up to 14x higher than the probability of selling to a new customer” (source: marketing metrics).
Another best practice is to get ahead of your renewals. Don’t simply pick up the renewal a few weeks or a few months before it’s due. Why not take advantage of technology throughout the entire customer lifecycle to learn about your customers, keep them engaged and ensure the quality of their experience is always high.
3. Ensure accurate forecasting
Finally, you need the ability to accurately forecast future renewals. Additional technologies from Salesforce, such as CPQ (to create future-dated renewal opportunities) and Einstein Analytics and Lightning dashboards, help you gain insight and understanding into the success of your renewal program so you can report on metrics like attrition rate and renewals pipeline.
Done well, the recurring revenue model can offer significant benefits. However, the model brings with it some complexity and operational challenges and so requires some thoughtful investment in systems and back-end processes to make it work well. Automation, good IT architecture and a strong data model are key components to success, as is a flexible system that can evolve with your business.
If you’d like to find out more about how Salesforce can support recurring revenues and/or a subscription-based business, please contact us today.