1. Success in the Subscription
Economy:
Relationship-driven Businesses
BRIAN BELL
CHIEF MARKETING OFFICER, ZUORA
February 2013
1

2. 2

3. What is the
Subscription Economy?
BUY NOW SUBSCRIBE
1999 Today
By 2015, 35% of Global 2000 companies will generate revenue through
subscription-based services and revenue models.
3 3

4. Consumers Are Embracing The Subscription Economy
• Movies - $5/month (Netflix)
• Bikes - $10/month (Capital Bikes)
• Music - $5/month (spotify)
• Car - $30/month (zipcar)
• Designer ties - $11/month (Tie
Society)
• Toys for Kids - $23/month (Spark Box)
• Convenience – PRICELESS!
SUBSCRIBE
“This movement is inadvertently creating a new economic engine
that has the potential to reorganize our economy”
Sarah Horowitz, The Atlantic
4

5. The Tech Industry is Embracing The Subscription
Economy
SUBSCRIBE
“The global market for SaaS will grow from $21.2 billion in 2011
to more than $92.8 billion in 2016”
5 Forrester

6. The Media Industry is Embracing The Subscription
Economy
SUBSCRIBE
“By 2015, more than 40% of media and digital products companies
around the world will use subscription services for their fulfillment,
billing and renewals”
Gartner
6

7. On Premise Giants Are Buying Their Way Into The
Subscription Economy
To be replaced with a paid image
IBM acquires DemandTec
SUBSCRIBE SAP pays $3.4Bn for SuccessFactors
Oracle pays $1.4Bn for RightNow
HP takes on Amazon’s cloud services
“Software giants face tough choices as their core businesses come
under attack from pure SaaS players”
Peter Golmacher, Cowen Group
7

8. Businesses Can Consumers Can
Subscribe To Anything Subscribe To Anything
ServCorp Google Apps Salesforce Test Tube Wonder Sitter Spotify
Virtual Office Apps CRM Beauty Samples Baby Sitting Music
Zendesk Amazon RingCentral Rent the Babbaco Mystery Tackle
Runway Box
Helpdesk Infrastructure Phone System Women’s Kids Fishing
Dresses Toys/Activities
Dollar Rubber Bespoke Spice
Workday Intacct Concur Post
Club Guides
HR GL Travel/Expense Condoms Luxury Items Date Idea
8 8

9. Why the Subscription Economy ?
Technology Demand Business Model Smart Money
Trends
Subscribe
9

10. The Subscription Economy Requires a Completely
Different Approach to Building Businesses
Product Economy Subscription Economy
Sell Units
Monetizing Customer Relationships
Pay-as-you-Go Pricing Plans
Price Per Unit
This image cannot currently be displayed.
One-Time Orders Multiple Orders Over a Lifetime
Forced to Pick a B2Any: Sell to Consumers &
Customer Segment Businesses
Complex, Interrelated Bookings,
Simple Financial
Metrics Billings, & Revenue
10

11. The New World
hasm
The Old World
11

12. Business Leaders Struggle With The
Limitations Of Existing Systems
Why Can’t I Make
My Processes
Why is it so hard Why Can’t I Find
FLOW
to GROW my What I Need to
business KNOW
VP of COO CFO
12 GM Sales

13. The Strategies Required to
Grow a Subscription Business
are Very Different
13

14. The Subscription Business Model Is Based Upon Long
Term Recurring Relationships
Increase the Value of
Your Relationships
Acquire New Maintain
Relationships Relationships
14

15. Pricing & Packaging Strategies Drive Growth
Packaging & Pricing Acquire New Increase Value Reduce Churn
Strategy Customers Per Customer
Launch First Product X
Add-on Options X
Monthly vs Annual X X X
Options
Higher Editions X X
Lower Editions X X
Product Bundles X
Pricing Tiers X X
Usage & Overage X X X
Multiple Currencies X X
Renewals X
Pricing Changes X X
15
Regional Pricing X

16. The Processes Required to
Make a Subscription Business
Flow are Very Different
16

17. Product Business
Commerce Billing Finance
Book Order Invoice & Recognize
& Ship It Collect For It It
17

18. Subscription Business
Quote-To-Cash
Renewals
Payment Failures
Account Suspension
Amendments
Account Management
18

19. Subscription Business
Billing
Commerce Finance
19

20. What you Need to Know with a
Subscription Business Model
is Very Different
20

21. Traditional Income Statement
21

22. Revenue ARR
$100
$0
22

23. Subscription Economy
Income Statement
ARR $100
Churn (10) Retention Rate
Net ARR 90
COGS (20)
G&A (10)
R&D (20)
Recurring Profit 40 Recurring Profit Margin
Growth (40) Growth
Net New ARR 40 Efficiency Index
Ending ARR $130
23

24. The Three Key Metrics of the
Subscription Economy
Retention Recurring Growth
Rate Profit Margin Efficiency
How much of ARR less Churn How much does
your ARR you less Non-Growth it cost you to
keep every year. Spend acquire $1 of
ACV
The metrics for Cloud computing is fairly different
“ from traditional enterprise software.
”
Bessemer Venture Partners – Top 10 Laws for Cloud Computing
24

25. But how do you run a
customer focused
company…
…with systems
meant for the
old world?
25

26. Your Systems Today
CRM ERP GL
26

27. I Need a System That Helps
me Grow , Flow and Know in
the Subscription Economy
27

28. An Integrated Relationship Business Management System
Billing
Service Rating & Billing
Billing Ops
Commerce Secure PCI Payments
Billing & Payments History
Billing Consolidation
Taxation
Payment lifecycle mgmt
Product Marketing
Subscription Service Catalog
Flexible Pricing Models
Multi Channel Commerce
Accounting Periods
Cross and Upselling
Accounting Close
Subscriber Renewals
Finance Revenue Recognition
Aging Balances
Subscription Metrics
Reporting
Accounting & Finance
28

29. Plugs Into Your CRM and GL
29

30. Z-Business Helps You Grow, Flow and Know
Our Mission:
Help you succeed in the Subscription Economy
GROW: FLOW: KNOW:
Build and grow your Run and flow your Have the right metrics to
subscription business subscription business optimize your
and revenue. processes efficiently. subscription business.
30

31. W A S H N N G TY ON K . C .
I EW O R D
R i t z C a r l t o n B u c k h e a d , AT L A N TA
March 6, 2013
5-9pm EST
http://www.subscribed.com/at.html
31

32. 32