Since the dawn of time, the established process of purchasing goods or services has been a one-time exchange. Customers Hand over the money and receive what you bought in return. This process is still important today, but the introduction of the subscription service has gradually gained traction. Instead of this one-time bulk purchase, consumers are now interested in the pay model.
About the Author
Adrian Pearce is the EMEA Principal Business Value Consultant for Licensing Solutions. Thales.
Not so with entertainment companies like Spotify and Netflix. They have shown that customers are willing to pay regularly for access to content. The key is that users value the small amount paid to access a wide range of content whenever they want, rather than a series of one-time payments for the latest songs or movies coming to the platforms. Although the models of these companies have been around for a long time, many companies are now considering whether their current traditional model is suitable for the purpose. In fact, according to IDC, it is expected that 50 of all industries will already be pricing and packaging their offerings with flexible subscription or consumption-based pricing models.
Repeatedly generating revenue and insights.
The advantage of licensing software in the subscription or consumption based model is mainly in the recurring revenue that it generates. Although the traditional model of many companies involves higher payments than before, this can often lead to higher peaks and lower falls. With subscription models, businesses see more consistent revenue streams and more revenue from their customers over time. Consumption models work very similarly, but higher pay per use models work where the amount of continuous income can go up or down.
Along with more regular income, their relationship with customers is basically a way for many businesses. Businesses initially negotiate to sell a product, but then become unaware of how, or even, the product is used. With software licensing, businesses can maintain regular contact with customers through their payments that reflect their continued interest in the product, but also know how the product is being used. This insight can guide future product development and business and what features are popular and worth investing in going forward.
Free to pay.
Every company faces its own challenges when it comes to licensing subscription services or their software. For some, the focus may be on how to turn their entire business model into a subscription service, while others may be able to persuade customers to pay differently or at all.
Take it. social media Companies, for example, are trying to monetize their services primarily for free, with “Blue Stories” via Twitter Blue and Instagram subscribers. Although these businesses have huge followers and interactions, it can be difficult to persuade consumers to pay extra for new features. Software monetization can help brands maximize the value of their offerings, but the transition from a free model to a paid service is a challenge and requires careful planning and flexibility. If it is rushed or not thought of, companies run the risk of leaving their customers behind who cannot see the value in paying for the service. Pricing strategy is very important regardless of your current model. Whether it’s moving toward a free payment, or the high cost of subscribing, getting the right approach is important, but also how and when it’s negotiated.
A 2019 price study by Simon Kutcher and Partners found that “a 5% improvement in prices without loss of volume and an average margin of 30% to 50% could easily improve profits.” However, rising prices can be much more complicated. Companies trying to raise their prices said they managed to get only 28% of the total price increase. This is the lowest price increase recorded by this study. Simply put, companies may feel the need to match subscription or consumption prices to the peaks they’ve had before, but consumers should look at the value of their offers before they’re willing to pay. Get the pricing model now and earn extra revenue by adding business features and raising prices accordingly.
Technology is not a priority.
Whether they are already selling their services directly to customers or moving to a free pay model, once a business decides to change, the challenge is how to set up the right licensing program. ۔ A common mistake many people make trying to develop their own system at home – it can waste time, money and resources and usually does not meet today’s needs, a key to future flexibility. Allow creating platform. Similarly, most companies do not build their own customer relationship management (CRM(Or Enterprise Resource Planning)ERPSystem, they should also invest in partner entitled and licensing solutions. Licensing models can be complicated to model and implement and can be costly if not configured correctly. Before deciding on the right solution partner, it is important for companies to make sure they have the building blocks to adopt a software licensing strategy. An effective strategy and implementation requires a vision that considers people, processes and technology. So, what to consider businesses?
Licensing ownership is often considered a later thought or IT work. Software licensing is becoming such an important part of the business that they must choose someone to guide them in the initial licensing decisions, but also the owner after the launch. This person needs to understand the needs of the customer and what is happening in the field, so that one can become outstanding. Customer experience. If it is an individual, they need to keep an eye on business and practical needs. Often these people are found in the product management side of the company.
2. This is a team game.
Software and service delivery and licensing is a team game, and to operate effectively, requires investment in every part of the business. This means having representatives from every part of the business, from sales and operations to product management. Everyone will be affected by poor strategies, from sales teams to losing deals to operations teams to unnecessary work. Before making a licensing decision, consult with different teams to get their point of view.
3. It’s not all about tech.
Finding technology solutions is actually the easy part. The real challenge is to integrate it into the business. Licensing teams need to focus on commercial and operational goals and they need to work with teams so that they can feel comfortable with the solution themselves and resolve any issues or concerns quickly.
4. Repetitive approach
Many teams will review their licensing decisions before launching a new product, but not later. Markets are constantly changing, so software licensing is no longer a plugin and leaves the game. Businesses need to keep reviewing their licensing requirements to stay competitive.
Therefore, as the world is rapidly moving towards a subscription and consumption model, it is imperative that companies ride. Whether they’re starting from scratch, trying to raise new revenue, or transforming themselves completely, the preparation strategy is key, both in terms of prices, people and processes, as well as technology. ۔