The secret ingredient of subscription success

With businesses are embracing the opportunity to tap into more predictable recurring revenue and engage more closely with customers, it’s not surprising that subscriptions are growing in popularity.

Yet, despite the potential, success with subscription services is far from a given. Putting in place a business model and implementing the right technologies to support it is key in getting started. But as competition hots up, you need to continuously innovate to keep ahead of the pack and minimise churn.

Finding an edge

A simple fixed monthly subscription may be appropriate when launching a new service, but if that service is successful then you can be sure that competitors will quickly arrive, and most likely undercut you on price.

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Lower-priced alternatives are a key challenge particularly in the digital services market, where the barriers to entry are much lower than in the physical goods market, for example.

So, time to market becomes crucial, as well as being able to easily track success and failure. No sooner than you have a product or service in the market, you need to know what’s coming next and how you will continue to evolve your offering to stay one step ahead of the competition, both in terms of service features and pricing.

Models of success

Take Spotify as an example. As the market leader in streaming music, they are certainly not being complacent, having recently added Spotify Family – a new plan which offers 50% discount for up to four other family members signing up to the Premium service.

Perhaps they knew that YouTube were planning to enter the music subscription business, so it was a pre-emptive strike to differentiate their offering? You can be sure that Google has deep enough pockets to make its service a success and the USP of being able to bundle music videos too, so it will be interesting to see how this new rivalry plays out.

Nevertheless, innovation is not always driven by competitive pressures, but rather increasing service adoption or seeing opportunities to enter new markets. Just look at how Amazon has evolved its Prime membership subscription. Amazon Prime was originally launched to provide free (and fast) delivery of millions of its products for a simple annual fee. The premise was that by offering free delivery, they were increasing the likelihood that customers would buy from them regularly, rather than opting for another online retailer for some purchases.

The challenge of course became how to entice the occasional Amazon user into paying an annual fee for the premium delivery service. The solution was to start bundling access to other services as part of the subscription, firstly with Amazon Prime Instant Video which put the company head-to-head with Netflix, and most recently with the launch of Amazon Prime Photos, which offers ‘free’ unlimited photo storage, competing with other paid for cloud storage services. So Amazon has created much more value in its ‘membership’, from what started out as an enhanced delivery service.

Ready to act

Long-term success is about agility and being responsive to the needs and opportunities of an evolving market. You must push boundaries, quickly try new ideas, and be prepared to fail. Finding a winning formula means learning from your mistakes and then quickly adapting your offerings to the demands of a dynamic market.

However, this is where many businesses get caught out. Their ability to innovate is not generally held back by a lack of business ideas or a culture that fails to value creativity. Instead, it’s often their own traditional billing systems and accounting processes that act as a barrier to change, and inhibit fast and decisive action in response to these shifting demands.

After all, it’s the back office that is often the engine room of new ideas within businesses and can act as the facilitator and catalyst for new innovation. And that’s where cloud technology can be so effective in delivering the flexibility and agility organisations need to commercialise new ideas.

>See also: What the new era in software licensing could look like

The latest cloud billing solutions evolve as your business grows, providing access to new features and enhancements automatically as part of regular software updates, driving greater business agility. That flexibility allows users to continue innovating over the long-term and deliver sustained value as your business expands. This may include bundled services and pay-per-use offerings as well as a variety of different billing frequencies and payment options, for example. 

The ongoing migration to subscriptions is now gathering pace, but success will depend on the ability to rapidly monetise new services. To achieve this, businesses will need to make it as easy as possible for their customers to engage with them and spend money with them.

Cloud billing can play a crucial role here too, slashing the time taken and the cost incurred in setting up new services and giving businesses the opportunity to quickly turn innovative ideas into monetised solutions. Implementation can be done in-house in a matter of days or weeks, and businesses need only start paying for the application once it’s being used commercially.

So for businesses intent on using the subscription business model to drive innovation, their existing billing and pricing models are no longer a barrier. Thanks to the emergence of cloud-based solutions, billing has become a facilitator of innovation for these businesses instead. 


Sourced from Louis Hall, Cerillion Technologies

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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