Dollar Shave Club. Netflix. HelloFresh. The world is shifting to a new kind of subscription-based business model. And there’s a reason why. Take the online men’s razor merchant Dollar Shave Club, for example. It turned the industry on its head by selling blades from just $3 a month. Then in 2016, it sold the entire business to Unilever for a cool $1 billion. Nice.
But the subscription model is just as relevant to services as it is to products. A recent survey by Exact and KPN found that 44% of professional services firms are either actively considering or experimenting with subscription billing. And 13% have already implemented the approach.
Subscriptions offer predictable and recurring revenue streams. Even more importantly, they provide new ways to develop and strengthen valuable long-term customer relationships. Say you’re an IT service provider. Subscription billing can provide the flexibility to offer customers a tailored mix of ad-hoc projects and recurring services: maintenance, hosting, cloud-services or domain-names.
6 steps to grow a successful subscription business
So now we’ve seen a bit about why you should consider subscriptions, let’s briefly look at how you actually go about getting it right.
- Success revolves around developing and actively managing strong customer relationships. Acquire. Increase value. Reduce churn.
- Extract maximum value from data by testing and experimenting. For example, you could try out two different versions of the same web page to see which performs better (called A/B testing by those in the know).
- Use that data to really get to know your customer and gain insights you can act upon, such as personalized offers. The Honest Baby app is a great example, which tracks a baby’s weight and nappy size as well as how often they need to be changed.
- Deploy the power of technology. The so-called Internet of Things will be huge for subscription businesses, generating more data and insights than ever.
- Stay in complete control of the finances with instant visibility of current and future receivables and payables, costs and revenues.
- Choose the right metric / Key Performance Indicators to monitor growth. Monthly Recurring Revenue is a new metric used by subscription businesses to accurately track performance and monitor growth projections.
Discover the dedicated Exact add-on
Are you thinking about making the switch to subscriptions? Maybe you’ve already taken the plunge. Either way, Exact offers a dedicated module that seamlessly integrates into your accounting and CRM. With powerful recurring revenue analytics, it delivers unprecedented insight and supports growth. All without a spreadsheet in sight.