Even after more than four centuries, the subscription-based business model continues its upwards trend. Introduced by newspaper and magazine publishers to the B2C market, subscription management is flourishing across both B2C and B2B business models. The popularity of subscription management in 2023 touches virtually every industry that sells services and/or physical or software products – think coffee, snacks, makeup, shaving supplies, health and wellness, pet supplies, software-as-a-service (SaaS), device-as-a-service (DaaS) – virtually everything! So it’s no surprise that B2B subscription management needs are growing at a rapid pace. We’ve reached an age where anything-as-a-service (XaaS) is expected by consumers and businesses alike. Given today’s propensity for this business model, subscription businesses are expected to grow from $22.7 billion in sales to 66 billion by 2027.
Subscription Management Delivers Benefits
Simply changing your business model to subscription management doesn’t guarantee that you’ll reap its many benefits or increase revenue. Unlike straightforward product and services sales, B2B subscription management is inherently more complicated. Typically, the subscription management business model touches every department (sales, marketing, product/service delivery, deployment, vendor management, customer support, etc.) within the organization. Not only does it affect nearly every aspect of your business, you also need to take into consideration technology, systems integration, user provisioning, etc.
Subscription management provides companies and customers with an array of benefits that other business models simply can’t deliver. From an organizational perspective, you’ll have the opportunity to:
- Attract more customers by offering low entry prices
- Receive a predictable revenue stream and plug revenue leaks
- Increase customer lifetime value (CLV)
- Boost profitability by delivering tiered upgrade paths with upsell and cross-sells offerings
- Build long-tail revenue
- Accurately forecast overhead costs, staffing requirements and costs, and inventory
- Eliminate cash flow bottlenecks
- Develop long-term customer relationships
From the customer’s perspective, subscription management provides:
- Predictable costs
- Access to products or services without a large outlay of cash
- Ability to try before buying
Let’s look at how two companies are crossing the chasm to become stand-out subscription providers.
United Technologies, known for many brands, are using the internet of things (IoT) to monetize its data and analytics. For the Otis Elevator Company, this means that Otis customers can now enroll in subscription maintenance plans. Likewise, other United Technology companies now capture data from planes that are in flight. This provides them with the ability to alert the airline when maintenance is needed, as well as automatically send an order for required parts. All of which are then delivered to the maintenance crew before the plane even reaches its destination.
Taking a similar approach, Michelin gathers data using smart sensor technology that’s built into its tires. The information they gather is used to better understand tire use under a variety of road, load, and weather conditions. This information is used to create subscription maintenance contracts, which helps their transport company customers improve efficiency and vehicle uptime.
These aren’t your traditional subscription management offerings. However, these examples show that with a bit of creative thinking (and the right technology), the subscription economy has no limits. Do you think your business is ready to adopt a B2B subscription management business model? Then let’s talk about what you need in place for subscription management success.
Is Now the Time to Join the Subscription Economy?
While not adopting a B2B subscription business model fast enough can pose competitive and financial risks, make sure your company is ready for the sweeping changes it brings. At the top of the list is ensuring that your billing system can handle a subscription-based business model. To bill your subscribers efficiently and accurately, your billing platform needs the ability to:
- Quickly set up and change subscription pricing models
- Easily manage billing cadences, invoicing cycles, pricing tiers, terms, mid-cycle changes, and prorations
- Automate manual processes
- Capture raw data from any source
- Streamline collections processes and reduce collections cycles
- Automate revenue recognition
- Seamlessly work with other systems
- Keep customer data secure and comply with regulatory standards
- Enable you to quickly expand your business on an international level
- Give customers real-time access to their accounts
- Turn the data you collect into intelligent insights
Essentially subscription management encompasses the entire customer lifecycle, from quote-to-cash. Often overlooked during the transition phase from selling products or services to a B2B subscription management business model, this process enables you to unify your data to configure, price, quote, bill, and manage your revenue.
QTC is Essential for B2B Subscription Management Success
As explained by McKinsey & Company, “B2B subscription businesses that optimize their QTC processes have greater success in adding new accounts, growing new accounts, and reducing churn. As a result, these high-performing companies grow their annual recurring revenue (ARR) at four times the rate of others.”
What can businesses that don’t have a QTC solution expect? McKinsey details the issues that a financial technology company experienced just six months into their B2B subscription launch. Read on for an overview of the struggles they encountered.
- Inundated by bottlenecks, the process required about 200 emails to move a quote to an invoice
- Sales created quotes manually
- Their entitlements system was unable to store subscription information
- Invoicing handled manually
- Salespeople needed to funnel deals through multiple functional teams
- Inability to scale put growth plans on hold
What did this organization do? Unfortunately, they had to take a step back from their subscription management goals while they developed QTC processes.
Put Your B2B Subscription Management Plans on the Road to Success
Leaving the success of your subscription business to chance is risky. Without the right B2B subscription management solution and well thought out QTC processes, you may find yourself struggling with delayed sales cycles, delivering poor customer experiences, increasing churn rates, slowing the sales cycle, and slowing growth.
BillingPlatform can help you manage the challenges of B2B subscription management. With unrivaled expertise, we help organizations across a wide variety of industries manage the entire customer lifecycle. From customer onboarding and billing automation through payment processing and multiple plan management to delivering exceptional customer experiences… BillingPlatform gives you the tools needed to handle B2B subscription management seamlessly, efficiently, and profitably. Reach out today and let us help you get on the right path.