Adobe logo sitting on top of numerous Adobe product logos

The Secret Behind Adobe’s Recurring Revenue Success

Matt Wegner, Head of Global Payments & Risk at Adobe, discusses how a data-driven operating model has revolutionized the way Adobe does recurring business.

It’s no mystery that Adobe is one of the largest subscription companies in the world. Since they pivoted to a subscription model for their 100 products in 2012, they’ve seen exponential growth. What’s their secret to recurring revenue success? After all, many subscription businesses experience a plateau in revenue, especially with subscription fatigue running rampant.

One of the key elements to their success is Matt Wegner, Adobe’s Head of Global Payments & Risk. For the last 25 years, he’s spent time in the payments space with companies like American Express, eBay, PayPal and Uber.

“I’ve been in product, finance, risk, operations, business development — you name it. I’ve built a really interesting career across a lot of different functions as opposed to going really deep,” says Wegner. 

In 2019, Adobe realized that, with their $20 billion subscription business, comes unique growing pains that typically arise due to a misalignment of focus in the payments space.

This is where Wegner came in. In 2020, he brought more focus to the payments space within the organization and supported Adobe in its continued recurring revenue success through COVID and beyond.

“If you take a look at Adobe’s revenue growth, the pivot [to subscriptions] happened between 2011 and 2012, but we were pretty flat for a few years. It wasn’t until four to five years out from the pivot to SaaS that this hockey stick [growth] happened and has been absolutely amazing. We still enjoy that growth today,” says Wegner.

The primary key to Adobe’s success? DDOM — the framework that drives its decisions and therefore, its growth.

Matt Wegner, Adobe, speaking at Subscription Show 2022, sharing payment success strategies
Matt Wegner, Adobe

What is DDOM?

With a very large, complex, global business, Adobe implemented something called DDOM – a data-driven operating model. Using DDOM, Adobe has developed what Wegner calls a “maniacal” focus on 17 different categories of KPIs. The DDOM model is used every day, across the organization and is one of the major contributors to their success.

“There’s really specific accountability at the product level and at the geographic level to understand where these KPIs are and to implement programs and A/B test these programs to drive them in the right direction,” says Wegner.

Part of the reason why this model became a centerpiece for Adobe was that their account updater broke in 2019.

“It stayed broken for a couple of months, maybe 60 days. And we discovered when we were closing the books out that there was a lot of revenue missing. [We thought] it had to be a mistake,” shares Wegner.

But there was no mistake. This incident cost the organization financially but also illuminated the need to pay close attention to simple yet important aspects of their payments space.

“[DDOM] is embedded in the way that Adobe thinks, the way that our business operates, how I’m managed by the finance organization and my management. And there’s even a Harvard Business School case about this. It’s got a lot of attention and, as an insider, I will tell you it’s absolutely one of the secrets to our success,” says Wegner.

Using DDOM, Wegner and his team think about the Adobe subscription model in a very structured way that drives results.

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Breaking down DDOM

Below is a table showing the 17 different categories that fall within the DDOM framework.

1. Traffic3. TwP Usage4. TwP Day87. MAU 1+10. Canx Try CS
2. TwP Signup 5. TwP Refund8. WK1 2+11. Canx Try On-Line
  6. D2P/ABM9. WK2/3 2+12. Save %
    13. Day0 Pymt
    14. Retry Pymt
    15. Gross Pymt
    16. Cancel Reactivate
    17. Cancel Win Back

The first three categories — Discover, Try and Buy — follow the customer journey. Customers come to the website and Adobe measures the traffic, a KPI many subscription businesses are familiar with.

Adobe also monitors trial subscription signups. With a valid payment type, for eight days, Adobe allows potential new users to try out their products. 

“On the eighth day, we try to convert you to a paid subscription unless you want to come back and cancel it or try a different product,” says Wegner.

However, it’s not enough for Adobe to see the inbound pressure on sign-ups. They also monitor whether or not the customers are engaged and if they’re using the product. There are many campaigns Adobe has put in place that educate consumers and encourage usage. Some of their products are extremely powerful but they’re also extremely complex. This is where a good onboarding process becomes crucial.

“We’ll do a ton to educate our users on how to use the product and maybe how to solve really specific needs they may have,” says Wegner.

In the buy category, the next and most important part of the journey of the customers is making a long-term commitment to Adobe. Therefore, Wegner and his team measure exactly how many of trial customers convert to paying customers on day eight. And if they don’t convert, Wegner and his team are measured on the different reasons why.

Of course, there are plenty of trialists that reach day eight and contact Adobe a few days later, seeking a refund. Adobe pays very close attention to this KPI and the reasons a user requests a refund.

Fingers walk across hundred dollar bills
Source: Envato Elements

Direct to Pay (D2P) or Annual Subscription Billed Monthly (ABM) are two acronyms Adobe developed to reference the two different types of subscriptions they offer. A D2P subscription allows customers to pay month-to-month and leave at any time. The ABM subscription offers the customer a deep discount in exchange for making a commitment to being with Adobe for 12 months. They closely measure the conversion rates on these offerings and tailor them to meet ever-changing customer demand.

Outside of the customer journey, Adobe also measures two other aspects of the customer experience — Usage and Renew. Monthly Active Usage (MAU 1+) covers how much the product is used by one or more users per month.

“[This] is one of the baselines that we spend a lot of time looking at,” says Wegner. “In your business, depending on how frequently customers should be using your subscription product, you may have a different baseline that you want to think about.”

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

In addition to monthly usage, Wegner and his team measure the first three weeks of usage for two or more users. Why measure this data? It offers Adobe detailed insight into where people run into problems and how to improve the onboarding process.

The renew category is a major focus for Wegner and is of utmost importance to Adobe. This starts with the cancellation process.

“We’ll measure inbound pressure in CS, our customer service organization, and our online cancellation flow, how many attempts there are to cancel, and then the save rates,” says Wegner.

Gold key with the word Success at the end - key to unlock recurring revenue success
Source: Canva

In this space, Adobe conducts a lot of A/B testing every quarter. They’ll try different tactics for the online cancellation flow as well as what they allow their customer service agents to offer to save a subscription from canceling.

Numbers 13 through 17 in the table above are where Wegner spends most of his time. Day0 is the monthly subscription renewal day. This day is based on when the customer signs up. Here Wegner looks for success rates and what may be preventing successful payments. After Day0, if the payment is not successful, the customer moves into a retry cycle.

“We’ll run a failed payment for up to four weeks. We’ll let the customers continue to access our product, and anything they’ve stored on the cloud or created will remain there,” says Wegner.

The data from Day0 and the retry cycle combined create the gross success payment rate. This KPI provides the best understanding of how many payments are actually successful.

Finally, like any subscription business, Adobe is not immune to cancellations. Wegner and his team look at not only how many people cancel, but how many reactivate within 30 days of the cancellation. If a customer returns outside of the 30-day window, Wegner considers that a win-back.

Putting it into practice

These 17 KPIs are the most important to Adobe and create the DDOM framework.

“There’s ARR — annual recurring revenue — attached to all of these and almost like a sales organization, goals to push these KPIs in a particular direction. And at the scale Adobe is with a global presence, a one or two basis point move in any one of these categories can be pretty material for our company,” says Wegner. 

Though not every subscription business is as large or has as many offerings as Adobe, they can implement the DDOM framework within their organization.

“These are the things you should implement and earn your company some more money,” says Wegner.

The one thing that every subscription business has in common is data. Though it may look wildly different in each business, using data to drive decision-making and increase revenue is Adobe’s secret to sustained recurring revenue success.

Want more insight into Adobe’s recurring revenue success? Check out Matt Wegner’s Top Ten Payment Success Strategies in parts 1 and 2 of a two-part series.

KPI, Key Performance Indicator.Business people presentation, question feedback and planning goals, performance results and indicators.
Source: Envato Elements

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

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