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How to Migrate to a Subscription Business Model with Salesforce and Why?

What if B2B businesses focused on upselling or cross-selling to an existing customer rather than acquiring new customers? The results would be incredible. Leveraging the existing customer base is what the subscription-based business model is all about. It entails nurturing customers and benefitting from the growth that follows.

The crux of such a business model largely depends on your customers' opinion – if it is positive, your business takes off; else, it collapses. So, you need to be customer-centric when you start your subscription-based business journey.

And the key thing to remember is customer retention is the sweet spot where you benefit from. In this blog, we’ll walk you through what a subscription-based revenue model is, its benefits, various subscription-based business models and how you can implement one effectively.

What is a Subscription- based Business Revenue Model?

Subscription-based models are those where customers pay for a recurring usage of a product or service to a business. Amazon Prime, Netflix, Wynk Music, HelloFresh, Birchbox and so on are some of the well-known services that are offered on a subscription-based model.

Wondering why subscription models work better than the other pricing technique? Let’s find out.

What are the Benefits of Subscription and Usage Revenue Models?

Unlike other revenue models, the subscription-based model has a strong wall of defense against economic uncertainty and helps create a stable customer base that will continue to subscribe to services or products; this allows businesses adopting this model to predict revenues with high efficacy. Here’re some of the undeniable benefits a subscription business model can offer you.

I) Accelerated Revenue Generation

Retaining customers is 5 times cheaper than acquiring new ones. The businesses that adopt a subscription-based business model are adept at customer retention and derive better customer lifetime value (CLTV) compared to the rest. So, these businesses tend to grow easily and more efficiently. The subscription-based business model also enables you to acquire customers faster through referrals and word of mouth. You can thus attract more customers, thereby expanding your business considerably and increasing its recurring revenue.

II) Better Revenue Predictability

Businesses following a subscription-based business model don’t have to reset their revenue forecasting button every quarter. They can start with a ballpark revenue estimate based on the data of the previous quarter and leverage churn rate numbers and gradually build from that point.

III) Enhanced Business Agility

When you establish long-term relationships with your customers, you can better understand their needs, requirements, pain points and expectations, and this enables you to cater to them better. With customer behavior mining platforms such as Salesforce Customer 360, you can not only manage your entire customer database in a single place but also respond to the dynamic requirements of your clients with your new product or service offerings.

What Are the Different Kinds of Subscription-based Revenue Models?

All subscription-based businesses have a common feature -- customers are charged for the access to the product rather than the product itself. Let’s now look at three popular subscription business models.

1) Pure Subscription Model

In a pure subscription-based business model, revenue for each subscription period is fixed. The amount that needs to be paid by the customer is predetermined along with the payment window. One of the best examples of this kind is Spotify’s flat-rate monthly subscription fee.

2) Consumption Model

Also known as the pure usage model, the consumption model’s revenue is not fixed. In this model, the amount that needs to be paid by the user and payment window is determined by the product’s usage. In other words, it’s a pay-as-you-use revenue model. Uber, Zomato and DoorDash are some examples of companies following this business model.

3) Hybrid Model

The hybrid subscription-based business model is a mix of both pure and consumption revenue models. This is why their revenue has both fixed and variable aspects. One such example of this business model is overage fees charged on your current flat-rate monthly bill for your additional phone minutes.

How Can I Implement a Salesforce-enabled Subscription Model in My Business?

Implementing a Salesforce-enabled subscription model requires the right tools and processes including building a consistent buyer’s journey that charts various channels customers may come across and how they might change their subscription package over time. You also need to track the latest metrics incorporated in the buyer’s journey. We’ll now look at the 3-step subscription model implementation process in detail.

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