All subscription companies would love to cut their churn rate in half and increase revenue by 20%, but unfortunately it’s usually not that easy. According to Matt Shanahan, Senior Vice President of Marketing and Strategy for Scout Analytics, the secret lies in being able to understand and utilize data. Nevertheless, most companies in the Subscription Economy don’t know which metrics to study, while others are still hesitant to embrace the new data-driven culture. Luckily, Shanahan, who shares some of his expertise on recurring revenue optimization in Zuora’s Accelerate ebook, which can be downloaded for free on Zuora’s website.
Shanahan details how the proper application of analytics can yield new revenue opportunities from existing customers and a greater customer lifetime value. “Having metrics that are tied to the economics and health of the relationship is critical to finding revenue opportunities,” Shanahan writes. By analyzing customers’ usage, subscription companies can begin to understand their clients’ value perceptions and optimize their product packaging, pricing, and advertising accordingly.
According to Shanahan, business leaders should narrow their focus on the return clients receive which in turn will help determine the perfect price to charge. The trick is to use usage data to continuously study revenue yield, the ratio between subscription price and value provided. “Putting usage data to work for recurring revenue optimization enables subscription businesses to maximize customer lifetime value,” Shanahan said.
Integrating the usage data, which is often collected and stored in its own system, can be a challenge for many companies. With the possibility of abrupt changes to things like rate plans, it’s important to have a flexible integration method. Shanahan goes on to list a few key suggestions when it comes to data integration, but those can only be found in the full article, “The New Analytics Discipline for the Subscription Economy: Recurring Revenue Optimization.”
It’s clear that embracing existing data is the most accurate, scalable, and cost-effective solution for the Subscription Economy. “Overall, understanding yield allows a subscription business to offer the right subscription, to the right customer, at the right price, at the right time,” Shanahan summarizes.
To learn all of Shanahan’s tips and advice, download Zuora’s new, free ebook and turn to page 57. I’d also encourage you to check out Scout Analytics and learn more about what assets and solutions they offer subscription businesses.