As more businesses from across all industries offer subscription-based models, software and services offerings need to stand-out to compete. Companies are no longer asking “if” they should offer subscription models, but “how” best to do so and profitably. Smart businesses are deploying innovative recurring revenue offerings that are creating new streams of revenue for their businesses.
Julie Donnell, Director, Business Value, of Thales and software industry expert on software licensing, revenue models, deployment and delivery, will lead this briefing.
Understand new and innovative ways to secure repeated business and renewals. For software and services companies, there many options beyond the simple monthly or annual based offering that help your organization stand out!
What You Will Learn:
- How to avoid the most common mishaps with your subscription model?
- What are the most important factors you should have as part of your subscription strategy?
- Tips for creating the right value to secure renewal revenue.
- The common challenges of a subscription offering?
On-Demand Playback
Presentation Slides (PDF)
Click here to download the slides.
About Our Experts
About Julie Donnell, Director, Business Value, Thales
Julie has more than 20 years of experience in the software industry with a passion for customer experience. Before coming to Thales a year ago, she led the software licensing and deployment program at Minitab, where her team developed a cloud licensing platform as well as utilized commercial licensing products. Her experience with end-to-end global software delivery allows Julie, as a Business Solution Advisor, to help customers prepare for licensing projects and measuring financial impact.
Thales is the leading global brand for software licensing, delivery and protection. Our customers use Thales’ Sentinel solutions to generate new revenue streams, increase customer satisfaction, improve operational efficiency, and gain valuable business insights. Based on award-winning technology, Thales’ Sentinel has a strong, global presence with over 10,000 customers in 30 industries, located in over 100 countries around the world.
About Kathy Greenler Sexton, CEO, Subscription Insider
Kathy Greenler Sexton is the CEO & Publisher of Subscription Insider, a media company uniquely focused on the business of subscriptions. Subscription Insider reports on daily subscription economy news and delivers best-practice information, training and research through memberships, training events and conferences. Subscription entrepreneurs and executives representing all sectors of the subscription economy depend on Subscription Insider to improve decision making, team skills and business profitability. Learn more at qa.subscriptioninsider.com and www.subscriptionshow.com.
Transcript
Kathy Greenler: Welcome everybody to Subscription Insider’s online briefing, how to offer subscriptions that stand out from the crowd. I am Kathy Greenler Sexton. I am the CEO of Subscription Insider, and I am thrilled that you are with us today. Today, we’re going to understand new and innovative ways to secure repeated business and renewals. Smart businesses are deploying innovative, recurring revenue offerings that are creating new streams of revenue for their businesses and offerings that go beyond the standard monthly or annual subscription. To help us understand this important discussion with us today are two software industry experts on software licensing, revenue models, deployment and delivery. Julie Donnell, Director of Global Business Value and Consulting at Thales, and Todd Steel Director of Product Management at Thales. So we are in really good hands for our discussion today. Welcome Julie and Todd.
Julie Donnell: Hi, thank you, Kathy. Great to be here.
Kathy Greenler: Great, fantastic. So for those of you who are new to Subscription Insider, we are immediate an information company focused on supporting executives, working and growing businesses in the subscription economy. We serve up daily news, we offer training, host events and conferences, and online briefings just like today’s.
I’ve a few upcoming events I want to make you aware of, the first is my monthly membership Coffee Hour, and that’s actually tomorrow at 11:00 AM Eastern. So for the members on this zoom briefing who have not registered yet, just grab your spot via the member center or our events page.
We have a few other upcoming briefings. I want to just make sure you are aware of avoid subscription pain, recognize the issues that chronically impact subscriptions such as slow posting speeds for your payments. High acceptance costs, complicated integrations and learn how to avoid them. So that briefing is actually going to be next week on the 11th. And the other one I want to highlight is, Changing Your Business Models Changes Everything. So as you adapt your business to changing customer expectations, discover ways to streamline your finance and your billing as you do that. And that briefing is going to be in two weeks, you can learn about these and other events that are upcoming in our events page at SubscriptionInsider.com/events
Subscription Show 2021, I am so thrilled to be talking about this with you. This is our flagship conference where we address recurring revenue subscription and membership businesses’ most pressing needs and challenges. And this is where leading executives like yourselves can connect with peers and talk to leading technology and services providers across the entire subscription ecosystem in our exhibit hall. So we’re going to be there in person live in New York, November 1-3, and we’ll also have streaming. So reserve the date on your calendars and we’ll be making some important and interesting launch announcements short.
So if you are looking for a technology service or consulting partner for your business that actually understands and has experience in recurring memberships and subscriptions, we have a resource that you should check out head on over to Subscription Insider’s, Subscription Business Vendor Directory, and you’ll be able to find pretty much anything that you’re going to need to support your business from subscription management, payment processing, to legal, IT services, retention, subscription marketing, and more.
And I want to highlight one of our leading vendors in the directory, in the software licensing category, and that’s Thales. This is an example of what a listing looks like and what you don’t see in the listing are demo videos, product information, and white papers in the listing as well. So we are very fortunate to have the Thales team here today. You have their contact information, so if you have any questions specific to them, you of course can reach out directly, but by all means, check out the Subscription Business Vendor Directory.
And speaking of Thales, let’s get started with our presentation today with Julie and Todd. Just a reminder, we are recording the session today and it’ll be available on demand afterwards. And please don’t be shy about asking questions, we have our chat and our Q&A just put in your questions as we go along, because this is your time and we want to make sure you’re getting the most out of it. So with that, I’m going to hand the virtual microphone off to you, Julie, to get started with our session today.
Julie Donnell: Okay. Thank you, Kathy. So welcome everyone. Todd and I are very excited to be here today and I think there’s something valuable in our session for everyone. And so whether you’ve been selling software for years and years, or whether you might be a hardware company and you want to start to monetize your software in some new way, we have lots of tips here for you today. So thank you for joining us. And we’re hoping to help you understand how you can offer subscriptions that stand out from the crowd. Everyone wants to be that red Apple in the bunch. And so hopefully you’ll learn something from us here today.
So how many of us have had this experience over the past year where you’ve had lots of free time on your hands. I know that I personally have experienced this, and I know many of my friends have as well. And so if you think about this, we’ve had a lot of free time because we’ve had no kids activities and sports have been canceled. And our travel plans have been derailed and there’s really no in-person entertainment, concerts, theater events, things like that. So really our lives have changed. And with this the reason for my story is this led me to purchasing a Netflix subscription. And many of you have probably done the same thing. And so if you think about that subscription, the question really is why do I continue to renew it each month?
And so month to month, as I receive that bill, I start to think about things like, am I going to continue to use it? And it might be surprising to tell you that I actually have not watched all of the content on Netflix yet. Although I may be competing at times for one of their top viewers, but is there new content that I haven’t seen or what’s upcoming or what’s relevant? These are all questions that I ask myself before I renew each month, or do I have a better choice? I’m pretty happy with the service that I’m getting from Netflix, but there are others out there. And so would I be better off choosing something else? And am I happy with the service and the performance? And yes, I have been in this case and it definitely seems worth it, but I share this story with you because I think it really relates to where subscriptions are headed and it isn’t just that one-time purchase, but it’s the ongoing commitment that is important and why people choose to renew.
So the focus has really shifted more away from the product itself to the product experience that one receives. And if you think about the Netflix example, there are lots of products that you can choose from. I could choose Hulu or Disney Plus or Apple TV or YouTube TV, the list goes on and on of streaming services. And so there’s marginal differentiation in some case between vendors and many of you probably are experiencing the same thing as you’re starting to compete in the subscription marketplace. And price, if you think about the lowest offers, everybody wants to give you the best price. And so when I think about price and subscription, I think back to a point in time when I had purchased SiriusXM radio like many of you probably have, and at one point I was paying a decent amount per month.
And I feel like now every other day I’m getting something in the mail that says, “Oh, you could renew for $5 a month,” or something like that. And so it’s clear companies are looking for lowest offers. But where you can really stand out with your subscription is in the experience. And this is really where the new focus is, and this is how you can differentiate yourself from your competitors. Everyone wants to be that Amazon, Apple experience. And so B2B is making this same shift. And how can you have an Amazon like experience in your market? That’s really what’s going to differentiate your product.
Todd Steel: Yeah. So I want to jump in now and talk about this exact topic that customers do have choices when picking their vendors. So I want to highlight what are going to be the key elements we want to focus on so that our subscriptions are laying the golden egg that you see in front of you. So there are two key elements or phases that I like to advise our clients to focus on adhering to subscription best practices. The first element would be focusing on providing value in a way that a consumer expects to purchase. In the not so distant past typically software was sold in a good, better, best models differentiating the feature set, but in today’s market, we see the desire for further flexibility, not just in the feature set, but also in the level of commitment. My six-year-old loves trampoline parks, and every time I take her there, I’m forced to do the calculation, “Oh, do I want to pay the one-time fee, once a week fee or an unlimited subscription?”
I’m factoring in how much time do we spend there? How happy she is when we leave, what else could I be doing with her fun time budget? This is really no different than choosing the right software today. I don’t want just the flexibility in choosing the feature set, but also I demand flexibility in the commitment level. So once you have a customer agreeing to your initial subscription, then the second phase of making sure that they are repeat customers settles in. So are you measuring and articulating the success a buyer has of using your software and are they achieving it with your solution? Are you offering the flexibility to allow them to change either upgrading or downgrading the subscription to ensure that they’re maximizing their value? And are you adjusting your product strategy to retain your hard earned customer?
Now, I think back to how my Netflix subscription has kept me as a consumer, knowing that I have a daughter on my account, they recently started emailing me reports of what she is watching and the theme she is interested in. Is she interested in the Girl Empowerment shows or is it the science and exploration, or is it movies about blossoming friendships? Netflix is really smart here, they know that they’re vying for my or our limited capacity to watch movies and content. And they compare themselves to other streaming services, just like Julie said, say Disney Plus. My daughter is six years old, so she loves the Disney catalog. But wow, Netflix really hook me because now by extending their platform to measure the value and provide me the buyer insights into the use of their service, I’m happy with the content my daughter’s consuming with just a two minute email report they send me. This gets me hooked. So let’s look at these two phases in a bit more detail. Julie, do you want to get us rolling maybe by focusing on the customer value strategy first?
Julie Donnell: Sure. Thanks Todd. So when we think about the customer value strategy, there’s kind of three pillars to think about. So first let’s talk a little bit about the subscription models themselves and making sure that you’re offering the right model. So obviously there’s a lot of choices here, most people are looking at offering some type of either monthly or annual subscription. User based licensing is also very popular along with feature based licensing and usage based licensing. So these are all choices that you have. And if you think of common examples in everyday life, one that comes to mind is Peloton, Peloton started out their service, they had their hardware or their devices. You think of their bikes, their treadmills, things like that. And what made them unique was also the subscription that would go along with it, the workouts. And now you can also just purchase a subscription without purchasing their devices.
And so a lot of customers come to us in situation where they’ve been a device manufacturer their whole lives, and now they want to start to monetize their software. So this is very common. And there are lots of choices for subscription model offerings. Next is really thinking about continuous value and understanding the consumption. So going back to Todd’s example of his daughter with Netflix, customers want to understand how they’re using the service or whatever it is that you’re offering. And they want to be able to see new and relevant features being released. These are very important things to your customer value strategy, because this really helps customers realize is the price that I’m paying matching the value that I’m receiving from the subscription. And so lastly then, offering a modern, easy experience is extremely important. The B2B world is always being compared to B2C now.
And so you’ll always be compared to how simple, easy it is to place an order at Amazon. And so you want to be able to buy and renew your subscriptions easily. You don’t want to be compared to the vendor who you get your credit card bill and you have that line item on there, and you say, “Where is the subscription, who’s paying for the subscription?” And it takes you a while to kind of hunt that down and cancel it. You don’t want to be that company. So being able to extend your subscriptions buy, renew, cancel, add features, these are all really important parts to your customer value strategy. So next, I’m going to hand it back over to Todd to talk a little bit about the business value strategy.
Todd Steel: Thanks, Julie. Okay. So now I want to expand on three specific strategies we see successful subscription businesses adopt. The first is focusing on the right set of success metrics to help prove to yourself, but also to your customer financial success of the subscription, the easiest renewals your sales teams will ever have are the ones where your customer is satisfied because they continue to see expanding value of the use of the software. In value based selling, this is a key element of growing your renewal business, measure the value, share the measurement with your customer and agree on an increased price at renewal time. That’s of course, relative to the expansion of the value being delivered. The key ingredients here are aligning the pricing to the use of the software, tracking customer satisfaction along the way, and having an open dialogue with your subscriber come renewal time.
Now, the second strategy I want to focus on is one of my favorites, and that is how to use scale to your advantage. So many examples of scale are often thought about, how do I offer burst capacity for my software to my customers to allow them to consume more when they need it. But here I want to highlight another strategy and that is taking your product downstream and how that can help you maximize revenue. And one of my favorite examples of this is of a producer of MRI machines that took their solution downstream. Their business was doing great selling these MRI machines to big city medical clinics that had the funding and the volume of clients to make a perpetual buy of these expensive machines worth their while.
Historically though, this vendor was cut off from the suburban clinics that couldn’t afford the capital expenditure nor had they the volume of clients to justify it. So to expand their reach to these clinics, they adopted a new subscription business model that allowed them to essentially rent the machines at near cost and then charge a per scan price to the clinic. This opened a whole new customer base and revenue stream for them not with introducing new features or having to R&D anything, but just inflexibly scaling their business model to new downstream markets.
Now third strategy is to continue to meet your customer’s expectations over time to lock in that future renewal. I see many subscription providers engaging their customer base, randomly testing the satisfaction of the customer through surveys and check-in calls by sales. Well, in this hyper-connected world we live in, one of the best practices is to let your product be the voice of the customer, measure the customer’s behavior and continuously track the key elements of value you are delivering and let that better guide your engagement and provide the needed insights in how to deliver more value.
Now, back to my Netflix example from earlier, I never specifically told Netflix that I have a daughter and she probably watches more content than I do. They must have been measuring my family’s use and some smart Netflix product manager thought, “Hey, how do I increase the value of this offering to the head of the household?” Even if me, the head of household isn’t watching the majority of the content. By understanding how my family uses the service, they were able to continue to delight me with new features by just sending me this weekly email of what my daughter’s watching. So now that we’ve covered the best practices strategies to focus on, let’s now turn our attention to some things we should really avoid, avoid the mishaps or pitfalls.
So the first mishap that we see in companies is to avoid the subscription due to fear of revenue cannibalization. We see this a lot, especially in hardware solutions that are addicted to this big perpetual sales. You don’t have to take the leap to subscription though in one giant step. Instead, many companies incrementally add new services around their perpetual base as a starting point to get their customers adjusted to a new model, and then iteratively increase the value in future updates delivered only via subscription. Change is hard for everyone and doing it too fast can be disruptive, but fearing the change can put you competitively at a disadvantage, especially when your competitors are offering a more attractive way to buy the same set of technology.
The second mishap is the lack of insight. I previously stressed on the key elements of a subscription business is the ability to measure your customer and use those measurements during the renewal process to demonstrate your increasing value over time. And the third mishap I want to highlight is of course, building a system that just isn’t flexible to adopt to the speed of business. Not every business model or feature packaging will work for your customer base, make sure that you’re adopting and leveraging a platform that gives you the flexibility to try and pivot to new ways to engage and do business with your customers. If it is expensive and requires that R&D project to support the change to your packaging or business models, you’re likely going to shy away from testing new subscription consumption models that really might end up delighting your customer base. Over to you Julie.
Julie Donnell: Okay. Thank you, Todd. So we’ve talked a little bit about some of the strategies that you can employ for moving your subscriptions forward and a little about the mishaps that we commonly see, but you may be sitting there thinking, “Okay, that’s all great. How do I get on some type of a journey to success?” And so obviously most people are going through some type of digital transformation plan and you want to be ensuring that the path that you’re on is successful. So next we want to just share with you some ways that we work with customers.
So there are four main ways that customers come to us and reasons that they’re coming for help. And so the first is being able to offer customer friendly models. So think your customers are asking you to purchase in a certain way, and you may not have the infrastructure to be able to support that today. So some common examples are companies that have commonly sold software perpetually, and now want to move to some type of a subscription model or companies that have historically been device manufacturers and now they want to think about how to expand their offerings to more subscription-based. Having a mix of these two is also very common. So think hybrid situations where we have products that you’re selling on-premise situations, and then also have products that you want to offer in the cloud. So that’s probably one of the most common that we see now.
So secondly, being able to listen to your product. Todd talked a lot about insights and being able to understand your software usage and being able to leverage this intelligence, to delight your customers. This is a very common reason and something that we solve for. Third would be getting paid for the software. So everyone wants to be paid for their investment. And if you are investing in software, you want to make sure that your customers are using what they’re entitled to use. So being able to optimize your software revenue, by making sure that your customers are compliant.
And lastly making it easy, so some of the situations aren’t easy as you’re transitioning, especially if you’re continuing to support either in the short term perpetual products, and you want to also be able to balance and start to transition those perpetual customers to subscription customers. That’s a difficult process, and we talk with customers to help them make it easy, offering self-service options for both end customers and channel.
Todd Steel: So to expand on what Julie said, I want to highlight four kind of objectives that we try to help our customers with, and we’ve done this over thousands of customers to help them transition to subscription offerings. And the first is really to help our customers achieve a single source of truth for what an end customer has purchased, how they’ve deployed and activated the software, and how the end customers are using the software. This single source is not only valuable for internal stakeholders, but also for a consistent end user and partner experience for them to understand what they’ve purchased, deployed and used. As vendors go about transforming their business by allowing a transition to subscription, or even a transition from maybe on premise to SAS offering, we also help our customers provide a seamless end-user experience to allow the customer to choose their preferred deployment models, even post-purchase.
And next, as I discussed earlier, we also help our customers to test new business models, getting the right packaging and business model is an art, it’s not a science. You have to try and see what’s working. So even though you’re trying these new business models, you want to be able to make changes from one to the other seamlessly, without disruption to your business workflow, and just as importantly, your customer experience. So this can include changes such as offering your on-premise solution and starting to deliver as a new cloud service. We see this consistently when customers are trying to reach and move to subscription based services. And lastly, in many cases, a need for faster time to market must be balanced, of course, with having optimized business operations.
Our Sentinel platform that allows our customers to have a single process for all order types. Always from the trials, to the ad-ons, to the upsells, they can do all of this efficiently with a single skew for SAS or on-premise delivery. You don’t have to differentiate and you don’t want to differentiate in your business process. And also for subscriptions that build based on usage, it’s important to have a single usage collection engine and data store to avoid errors or inconsistencies during a customer’s invoicing, especially if they’re buying multiple different subscriptions from me.
So let me highlight in the next slide one example of this, a great example is a customer of ours Trimble. And Trimble is a company that many people know through their acquisition of Google’s SketchUp CAD software. It’s one of the most popular CAD softwares out there. But they’re also known for other technologies such as Earthworks, which is a software that helps operators of earth excavations, bulldozers and graders efficiently and quickly resurface the earth on the fly. Well, Trimble wanted to move from this typical perpetual hardware sale and adopt a subscription wave to allow for their offerings to move from capital expenditures, to a recurring operational expense for their customers.
So as they began this transition, of course, one of their main concerns was having the best customer experience and helping the customers understand what they have access to, what they’ve deployed and what solutions they’re using. So with Sentinel, we helped Trimble with this gradual transition from the perpetual one-time hardware sales, to moving their solutions to subscriptions, and also managing SAS delivered solutions for them. We provided the single source of truth that allowed their business systems to have a complete view, regardless of how the product was delivered. Allow the end customer to understand what they’ve purchased and also allow their partner distributors to easily stock fulfill and track software being sold through the channel. Over to Julie, if you want to discuss another example.
Julie Donnell: Yes. So another customer example that I’ll share is SHARP and many of you probably have SHARP televisions in your house. But the division of SHARP that we’re working with, they’re really focused on productivity and office productivity. So some of the challenges that they came to us with was they wanted to really scale their licensing infrastructure. They had some homegrown licensing and they were looking to launch new SAS product lines. They also needed visibility across all their deployment models. Having a mix of perpetual products and cloud products, they really needed to be able to have visibility across everything and being able to sell through multiple cloud marketplaces was also very important to them. And so traditionally this division of SHARP sold perpetual licensed products with mostly hardware on-premise deployments. So think printer, other office machine capabilities, and software associated with those.
And so their new product line really is a family of collaboration, productivity, and analytics, applications, and systems. So think online office space users to those rooms and things like that. And so some of the key requirements included things like a custom developed portal for channel. So they do most of their business through the channel and they needed to be able to centralize all of those orders. And so like many of you, looking at new ways to drive revenue through cloud marketplace, different channel options, having that central source of truth was extremely important to be able to grow this revenue.
And then having the visibility for not only the end customers, but the activity from the partners themselves. This was all some of their key requirements and reasons that they chose Sentinel. Additionally, on the SAS side, we were able to help SHARP provision and track all types of product life cycle activities. So think non-commercial events, it’s really important to their business to be able to track these events, to be able to price their products accordingly. So this is just some of the ways that we’ve helped customers. And so with that, I want to take some time to open it up for questions that you may have today. So I’m going to hand things over to Kathy.
Kathy Greenler: Thank you. Those are two actually very interesting case studies. So thank you for sharing that with everybody. So just if you have a question, put it in the chat window and I’ve got some that I’ve been recording here and I do want to give kudos to Jack who mentioned the Netflix tech team blog, which really gets to your point, Julie and Todd about everything that they’re doing and how they’re thinking. So I thought that was actually a really interesting comment Jack in the chat window. So thank you for that. Let’s see, so we have a question here, which is one I actually see all the time in so many different ways, which is understanding lifetime value versus cost and how do you understand, let me read it, the real value of a customer versus the cost of fulfillment of a product or service. So I don’t know who would like to take that, but if you want to address that, that’d be perfect.
Todd Steel: Yeah. So I think when we start talking, especially in the context of we talked about measuring subscription value, we talked about how do you relate to that value during renewal time and during onboarding time. So it’s not a one metric meets all type of approach. But generally what we’ve seen as best practice, especially we see this wave of value based selling is kind of a new model that really goes hand in hand with selling and maximizing your subscription revenues. And so generally when we are helping our customers onboard their customers, generally it’s best practices to establish what are the metrics and agree what the metrics are before you actually provision the software to them.
What are you looking to get out of the software? Let’s create a collaborative measurement capabilities that we can track over time while you’re using that subscription and then come renewal, this is the perfect renewal experience is you just see the bar graph go up and up and up and the value go up. And the customer already knows they want to renew because they can justify, look, I have a graph that I can show my management team that this is just, the ROI is through the roof. Let’s renew at a higher value. Julie you have-
Julie Donnell: No. I agree, Todd. And I think you really have to start from the end state and work back from that. So think about what is it that you want to occur and what is the customer lifetime value that’s relevant for your market, and then kind of work back from that and make sure that you have the right metrics in place to be able to predict the outcome that you desire.
Kathy Greenler: Great points. And it’s really understanding that user versus the person paying that bill, it’s really important. I have a question here. So what are some of the strategies for offering a simple customer experience, if you have multiple ways of purchasing. So if you’re offering your product through a marketplace, through your channel partners, what are some strategies for people in that situation?
Julie Donnell: I can start with that. And so I really think it goes back to your customer journey and defining what that journey is that you want customers to experience, and then putting in place the systems to be able to support that journey. And a lot of times you want things to be as simple as possible on the outside, and things can be complicated on the interior. So for many customers that we work with, they have lots of different systems and things that they’re making work together, but on the exterior on their customer user interface, things are very simple and straightforward and that’s what you really need to strive for because the customers definitely don’t want to see all of the baggage. They want to see one simple way to gain access to your product, to know what they’ve purchased, regardless of who they’ve purchased from.
Todd Steel: Yeah. And I would add on, so I think you covered more of the external view. I would like to say that in many of the conversations I have, what we see is that operations teams or fulfillment teams will start building product line specific workflows within the business systems. And generally when you are delivering devices or you’re delivering on-prem, and then you’re also trying to deliver services. The meaning of the data model that’s flowing through your workflow, backend systems is all over the place. And it becomes very complex for your IT teams to relate to these different datasets in the system. And that just creates kind of spaghetti backend systems. So this goes back to kind of one of the best practices we mentioned earlier, which is single source of truth.
It’s really important, and we see this time and time again, to get a normalized view of what is a subscription. What is the end of the term of that subscription? What does a user mean? Having a single system where the business lines can integrate with a single interface, regardless of how they do business, regardless of how they deploy or price or package their features. You want one system that normalizes that view. So all your business operations teams can use it, whether it’s the view in Salesforce being a consistent view, whether it’s the end customer portal looking at, “Hey, what did I buy,” or your invoicing system. It needs to be able to relate to these data objects in a very consistent way. And so I think single source of truth is really one of the important aspects to launch a successful program.
Julie Donnell: No, I totally agree, Todd. I’ll add one other thing to that is your customer base. If you’re creating new products, your new customers for those products are likely customers that you have, how many times have we heard it’s easier to retain an existing customer than it is to get a new customer. And so if you are expanding and offering new products, software, features, whatever it is that you’re building, you’re likely to turn to the existing customers that you have today as a source for those new product lines. And so having that central source of truth, couldn’t be more important in those cases.
Kathy Greenler: Good points. I have another question here, which is can companies be successful offering a particular product with both subscription and perpetual options?
Julie Donnell: Yeah, that’s a very good question. Of course, we see that every day. There are companies that have perpetual offerings that they’ll always have perpetual offerings. And subscription offerings, maybe something new, they may be changing, evolving. And so that’s very common and companies are very successful doing that.
Kathy Greenler: Todd, do you want to check in on that one because I’ve got another question I can-
Todd Steel: No, let’s go to another question. You don’t need to hear me say the same thing in a different way.
Kathy Greenler: No, that’s fine. So we have a question here from a total cost of ownership perspective, isn’t it just cheaper for end customers, especially in B2B just to buy perpetual? What is the value argument here?
Todd Steel: Great. I can start from my product management experience perspective. So from an end co… I think you’re saying total cost of ownership from the purchaser, the person who’s purchasing a software. So in general software, and especially as you start to begin to deliver subscriptions or services delivered in the cloud, it’s generally a continuous stream of value you want to provide, this is what hooks people, this is what keeps them going is the increasing value over time. We don’t want, in B2B typically you don’t want to sign up a subscription and have the same yearly payment for the next 10 years. You want to grow that subscription, you want to grow that renewal. So you want this continuous delivery of value. Well, when you start doing perpetual sales models, generally then you have to focus your delivery around versions and feature versions.
And you have to make sure every version of your product is delivering something of value. And then you have to, from a sales perspective, convince the customer, this is the next best thing. And it becomes a headache. What version is Facebook on? No one has any idea, just keep giving me the features, baby. And this is what hooks and I think maintains that relationship over time is I’m signing a subscription, not because I’m being delivered one thing of value that doesn’t change, I’m signing on for a platform that is going to increase in value over time, because that’s what I’m expecting. I want the ROI to increase over time and I want to be able to convince everyone in my organization, I picked a platform that is increasingly good for my organization.
Julie Donnell: Right. And one additional thing is going back to what we were saying earlier about how people are competing today, it isn’t just on price. So whenever you think of TCO, you’re thinking is it cheaper to do perpetual and you’re focused on price, but in the new world, it’s all about creating customer advocacy and creating those champions for your products and you continuously proving the value of them.
Kathy Greenler: Good point. And getting back to experience and it’s all about the customer. Absolutely. So speaking of perpetual versus subscription if we move there, that means you’re going to need to… I’m reading a question here, so you’re going to need tools for the licensing, the entitlement and delivery. How do you get buy-in from your organization, if you are in that kind of perpetual mindset versus a subscription, what are your tips for working that in an organization?
Julie Donnell: So really these types of tools, they work across the organization and they touch nearly every department, from sales to marketing, to operations, to product development. And so it’s really important to have a solid, transparent process where you have stakeholders involved from every group and you’re really listening to what each group needs and you’re able to create systems and processes and procedures that are going to work for everyone. Lots of times when we’re working with customers and it’s just one group coming to us, it’s really difficult to get the buy-in that’s necessary. And so I know we personally work with customers to try to help create that cross departmental buy-in. And I think that’s really necessary. Delivery isn’t just one group for sure.
Todd Steel: And just to add on that, one of the things that we see when we start engaging with those different groups is when you have this single source of truth about what customers are using, what they aren’t using and how they’re using the software, essentially every group in the organization can find value in that dataset. So your customer success, your customer service teams know exactly how much of the software, what version of it, what’s been deployed, what hasn’t been deployed, what’s turned on, what’s not turned on, et cetera. Your finance team has a receipt for delivery of the software, whether they’re using it activated or not, you have that receipt. Your operations team can plan ahead for fulfillment spikes during seasonality of fulfilling your product. If you have the right visibility across the business lines for them.
So each and every department, no matter what department it is and of course, product, product management. So knowing what feature set my customers are interested and not, more important is what not, I don’t want to continue to invest in platforms or features that no one finds interest anymore. God, I would love if the product just delivered me a report, hey, I’m working on these things, stop wasting your time. So I think that’s part of it is I think there’s always a convinced… Everyone benefits, every organization benefits from having the single source of truth or this visibility into the state.
Kathy Greenler: Okay, good points. I have another question here that’s on something completely different which is pay-up authorization approval rates. So here’s the question, how do you measure pay-up authorization approval rates against pricing offers that you make with your customers?
Todd Steel: So for usage collection, so generally when you start collecting usage, you go through the typical aggregating that usage. So it depends really what your starting point is. We see customers if you’re delivering your software as a service on a pass, generally, you’ll have a lot of access out of the box to that usage information. It’s already pre aggregated, it’s collected aggregated for you. But oftentimes not everyone has this utopic ability to deliver software that’s always connected. So we have some technologies around that where you can collect usage and still measure the value output of the program we aggregate it, we collect it and we cleaned it up. And then you generally send this kind of data to a rating system that’s typically best practice.
And then from the rating system, it goes to an invoicing system. So that’s generally the business flow around how you deliver a bill on usage. And your question about was pay-up, so pay up means you prepay or part of your subscription, you have so much usage. So generally this is just a post aggregation processing step of that data. Our system, an entitlement management system, for example, is that source of truth of what subscription level you purchased, what you are authorized to use. And so then the true-up is a very simple processing calculation before the rating and invoicing steps.
Julie Donnell: Todd, I also think it could really, obviously it could be different depending on the market. So think in the medical space, depending on what your policy you would want to have for your business or brand, you also may want to think about if there would be grace periods involved. And if you have some type of a pay per use model and your device is being used somewhere, that it’s mission critical and you don’t want it to turn off, even if they’ve exhausted all of their usage. And so just some things to think about, what type of policies do you want to be known for. And do you want to distinguish your brand for, those are all things to think about.
Kathy Greenler: Good points. Here’s a question on building versus buy. What are the benefits, what should you be thinking about as you’re exploring those issues within your organization?
Julie Donnell: So I love this question personally, because I was involved in a development project at one point where I led the development of a licensing platform. So I’ve seen firsthand what it takes to develop it, support it, maintain it and add new features to it. And so I think it really comes down to your philosophy on what is it that you want to have your software engineers doing? Do you want to have them building you products to further your position as a company, or do you want them becoming experts in software licensing and entitlement? And if it is then, if it’s the latter, then you should build it. And if not, then you should probably turn to a third party.
Kathy Greenler: Todd, any input on that?
Todd Steel: No, I think that’s exactly right. I love, I can’t tell you the… Every product team, I’m a product manager, any business problem anyone in the organization brings to me, I want to solve it. I want to show off my R&D team is the best. But where that begins to fall apart or where customers start to find the rat holes is which product team? You have multiple product teams, they all want to do it a different way. Again, they all want to normalize the data in their view and the way they want to see it. So it’s really, unless you have a core team focused on this business problem, and you’re okay with the ongoing investment into maintaining the system, maintaining the connections to your back office, maintaining the interfaces so that when you bring new products to market, you have the flexibility to do it in the ways that you want. That’s the big problem, that’s why a commercial vendor really helps you get to market quicker.
Julie Donnell: Yeah. One other thought I did have that I probably should have mentioned too is it depends upon the complexity and nature of your offering too. And if you’re going to be wanting to try to pivot and do new things and get to market in ways that maybe you’re not today. So that’s something that we’re continuously investing in is being able to support new models and being on top of the latest and greatest offerings. And so your team would need to be prepared to do that if you did want to build on your own.
Kathy Greenler: Good advice.
Julie Donnell: Good question.
Kathy Greenler: Yeah. We’re going to start wrapping up here and if there’s questions that we didn’t get to, thank you very much for the questions, we will follow up separately. And feel free if you have any other questions you want us to ask offline, just put them in the chat and we will follow up with you. So with that Julie and Todd, what advice do you have as we wrap up, as people look to doing different types of subscriptions that really keep their customers and their customers’ journeys and needs in mind.
Julie Donnell: So I would say my biggest piece of advice would be to iterate, try things and be able to track the success of those offerings. Whatever it is that you’re trying to do, make sure that you have benchmarks in place to be able to know how successful you are and to be able to pivot and make a change if necessary. So I think that would be my biggest piece of advice along with being able to offer a very smooth customer experience.
Kathy Greenler: Great advice. Todd.
Todd Steel: Yeah, I would say I agree. Exactly, that is one of the main points I think subscriptions are great. And what I would advise on top of that is your business model and the flexibility and how you allow your customers choose to deploy is a feature differentiator, it’s a competitive advantage. You don’t need R&D to create a unique offering for your customers. I see it time and time again, where the success comes, just like Julie started the presentation on. The experience of how I consume your software and how I relate to the value getting out of it, can be the thing that makes you stand out among the crowd. So I would focus there, really adopt that.
Kathy Greenler: That’s great advice. So for everybody if you have any questions again, just submit them or follow up. You have Julie and Todd’s contact information on your screen right now. I’d like to thank all of you for your time today, we know your time is valuable. And Julie and Todd, thank you very much for sharing your insight.
Julie Donnell: Thank you. Thanks for having us.
Todd Steel: Thanks for having us.
Kathy Greenler: It’s been great having you here. So with that, we’ll wish everybody a great day and we will see you next time.
