Like all companies, starting strong in the new year is in full swing. But with concerns about the economy putting pressure on growth, now is the time to solidify your plans to help influence your revenue performance. As we start off 2023, we’re reviewing a few revenue management tips to consider to help achieve your revenue goals.
Making Revenue Management Part of your DNA
The growth of subscription-based service offerings and sophisticated usage-based monetization models are offering digital businesses some very tangible benefits. A consistent, dependable revenue stream, superior visibility into revenue forecasts, deeper relationships with customers and greater enterprise value. These recurring revenue relationships are having a profound impact on virtually every company regardless of its industry or primary go-to-market approach (B2B, B2C, B2B2C).
To capitalize on these trends, revenue management must become part of your DNA. Here are the top 5 things to consider in the year ahead to boost your revenue performance.
1) Simple subscription billing is waning
A quick look at some recent figures can certainly be indicators that the once thriving subscription economy is on a downward trend. For instance, in 2022 Netflix lost 200,000 subscribers and have reason to believe that a few million more will churn.
- A single poor customer experience is enough for 95% of consumers to cancel their subscriptions
- 66% of consumers say that subscription-based companies are still getting customer service wrong
- This was echoed by 88% of customer support staff reporting that they are losing customers due to poor customer service
However, the answer to the future of the subscription business model isn’t black and white. The subscription landscape is extremely complex and putting all your eggs in the subscription basket is an oversimplification of how enterprises will sell and maintain profitability in the year ahead.
Billing trends for 2023 suggest that a combination of subscriptions, usage-based pricing, hardware, and other one-time charges are beginning to take a foothold. We believe that hybrid pricing strategies will continue to see an uptick as we move through 2023. To this end, a billing system that only handles the subscription lifecycle will no longer be enough to meet the growing and changing needs of enterprise customers.
2) Revenue management becomes deeply ingrained
Over the last 10 years or so, revenue management evolved into a strategy and more recently evolved into a commercial strategy. This evolution has laid the groundwork for revenue management to move from being an isolated discipline to becoming an integrated component that requires the collaboration between revenue management teams and their sales, marketing, and customer support counterparts.
When it comes to revenue management, organizational departments aren’t the only thing that’s moving to a more integrated approach. Traditional IT silos such as CRM and ERP (where billing is a component of ERP) are being replaced by inclusivity such as RevOps – and rightly so. It’s estimated that about 35% of customer interactions are triggered by billing – putting billing at the very center of your RevOps strategy.
3) Innovation is fundamental for SaaS businesses
It’s hard to believe that the software-as-a-service (SaaS) business model has been around for over 30 years. And throughout the decades, SaaS organizations were under a constant state of evolution. To maintain their impressive growth rate (500% in the last seven years) and reach their expected revenue of over $715 billion by 2028, this disruptive business model will need to be at the forefront of innovation.
Emerging billing trends among SaaS organizations show deeper integration of technologies such as artificial intelligence (AI) and machine learning (ML). These technologies are key to simplifying complex tasks, automating redundant work, improving database management, and increasing data security. Additionally, to grow the business, some SaaS enterprises have begun launching advanced SaaS offerings that are based on AI platforms. We believe this trend will steadily increase and many SaaS businesses will follow suit. In conjunction with AI and ML, other technologies such as chatbots to improve customer communication and service, and analytics software to predict customer churn, personalize customer interactions, and improve customer segmentation will continue to make their way into SaaS companies.
While integrating emerging technology is a focus for the coming year, customer retention, growing customer lifetime value (CLV), and developing new revenue strategies will be a priority to reduce churn and improve revenue. Buyers have never been more perceptive or demanding and capturing untapped customer value will require SaaS organizations to take a close look at their current pricing strategies. In 2023, SaaS businesses will accelerate the pace of migrating to customized revenue models such as usage-based pricing/value-based pricing.
4) Bolstering security remains a priority
With cybercrime continuing to take its toll on companies large and small, data security remains a top priority for businesses across virtually all industries. It is estimated that cybercrime will cost companies worldwide an estimated $10.5 trillion annually by 2025.
Application programming interfaces (APIs) will continue to play an increasingly key role in controlling access to data, contextual searching, and application filtering. This type of security is accomplished by de-linking software or applications from third-party servers and instead connecting them to the API layer.
As SaaS applications continue their unwavering upward trend, billing trends show SaaS organizations will increasingly embrace multi-cloud environments, add more Internet of Things (IoT) devices to their networks, and expand their distributed workforces. To lessen the chance of becoming a cybercrime victim and to combat identity theft, SaaS organizations should place increasing importance on identity management (IdM) and know your customer (KYC) solutions.
Identify management focuses on managing the attributes related to a user, group of users, devices, or other network entities that are attempting to gain access to resources. Additionally, it helps to protect identities through an assortment of digital identity technologies. These can include passwords, multi-factor authentication (MFA), single sign-on (SSO), biometrics, and more.
Identity protection is a goal of KYC. It reduces fraudulent or illegal transactions and the risk of identity theft. There are many variations and technologies used to enable KYC and some of the most common include:
- A user interface (UI) embedded in customer facing applications
- Incorporating AI and ML to enhance customer verification
- The application of customer risk scores
5) Embedded finance positioned to triple in the next 3–5 years
While not new, recent billing trends suggest embedded finance is poised for accelerated adoption. In fact it could become mainstream over the next few years. According to McKinsey, the embedded finance industry grew into a $20 billion market, in the US alone in 2021. It’s expected to triple in the next 3 – 5 years to become a $7 trillion global industry over the next 10 years.
Designed to enable non-financial companies to offer financial products and services to consumers and businesses, embedded finance is a broad category that spans e-commerce merchants providing insurance, coffee shops offering 1-click payments, organizations that provide branded credit cards, inventory management, employee scheduling, etc. As embedded finance continues to mature, integrating financial products into the digital interfaces used daily is key. It will become a natural extension of everyday non-financial experiences. The unanswered question is the role billing solution providers, like BillingPlatform, will play in the embedded finance landscape.
Throughout 2023, innovation, customer experience, security, and revenue growth will be top priorities and the revenue management trends listed above will be the enablers for them to reach their goals.
Revenue Management is Empowering Companies to Monetize any Revenue Opportunity
To meet 2023 revenue performance goals, the ability to be agile in virtually everything will be the common denominator for success. And an agile monetization platform is key in enabling the innovation that organizations require.
Designed for future needs, BillingPlatform provides a complete solution that supports all your business requirements – any product, any service, any business model, delivers unmatched agility and scalability, and provides you with the ability to run your business with greater efficiency, accuracy, and control.
Is revenue management a part of your DNA? If you’re ready to learn how we can help, then check out this analyst report on SaaS recurring billing solutions. You can also contact our team today.