This IDC Flash includes a recap of key insights and announcements from Zuora’s sixth Subscribed customer event, held April 12–13 in San Francisco. In past years, much time was dedicated to educating the audience on the merits of subscription models. Now that “everyone is doing subscription,” the event has become a valuable forum for sharing subscription best practices. In detail:
- The theme of the event was “turning customers into subscribers.” Sessions, content, and speakers were focused on strategies for building ongoing, mutually beneficial relationships and deeper customer connections.
- Zuora CEO Tien Tzuo said during his keynote that “pricing and packaging is the number one strategic weapon for achieving growth.” It is no surprise then that, once again, the most popular sessions at the event included those on pricing and packaging. Key topics of discussion included usage- and outcomes-based models and the impact of dynamics, such as growth of connected devices, on the rise of subscription business models.
- For many Zuora customers, the subscription business model is a core component of their organization’s competitive advantage into the next decade. Customers showcased included Schneider Electric, Okta, Crunchyroll, GoPro, and The Seattle Times.
Situation Overview
In April 2016, 1,500 people from finance, IT, marketing, and products teams converged at San Francisco to attend the sixth annual Zuora Subscribed customer event. The conference keynote kicked off with statistics that help demonstrate how much the world that we live in is shifting in focus from ownership to outcomes. For example, according to Zuora, every day:
- 356,908 people commute on bikes that they don’t own.
- 78 million people drive connected cars.
- 114 million people live in smart homes.
Indeed, there is a shift taking place in the way that we acquire and consume so many of the things that touch our daily lives, and Zuora seeks to be at the center of this. By offering commerce, billing, and finance capabilities to companies that are growing their businesses with digital offerings based on innovative business models, Zuora is helping its customers shift their focus from products to subscribers and their value from things to outcomes.
IDC has observed that companies in every industry are thinking about the role that flexible, subscription-based pricing models will play in their future growth strategies. As in past years, a key takeaway from Subscribed is the number of interesting and diverse companies that are making the subscription business model a cornerstone of their business strategy for years to come. Key customers showcased at Subscribed included:
- GoPro. Maker of a versatile camera designed to help people capture and share their lives
- The Seattle Times. Local news and other content for Seattle and the Pacific Northwest
- Surf Air. Offers unlimited private flights for one monthly fee
- Curious World. An online early learning activity platform
- Okta. Software-based foundation for secure connections between people and technology
- CLEAR. Airport and stadium security enabler
- Schneider Electric. Global specialist in energy management and automation
- Carbonite. Cloud and hybrid business continuity solutions for small and midsize businesses
- Pivotal. A platform-as-a-service provider
- DocuSign. Enables users to send, sign, and manage documents anytime, anywhere, and on
any device - Dyn. Cloud-based Internet performance management
At the event, Zuora unveiled a road map for Zuora ’17. Throughout the next year, Zuora will be making upgrades and additions to its “relationship business management” system to help customers”monetize anything, enable every team, and scale globally.”
Monetize Everything
Pricing and packaging conversations happen left and right at Subscribed, and for good reason. In his keynote, Zuora CEO Tien Tzuo told the audience that pricing and packaging is “your number 1 strategic weapon for achieving your growth strategies.” Many attendees are in the midst of transitioning their companies from a product-focused to a service-focused company and are trying to answer a central question: When you are no longer selling a product, how do you measure value? How do you price for miles driven or calories consumed?
Pricing plays a key role in supporting and enabling the ongoing development of customer relationships. IDC has identified three categories of metrics that support this:
- Access-based pricing metrics
- Consumption- or usage-based pricing metrics
- Outcomes-based pricing metrics
These are not always mutually exclusive — sometimes, an outcome might be quantified based on usage. Regardless of what pricing strategy the customer lands on today or in the future, Zuora is determined to be able to support it. The platform currently supports over 40 pricing models, and Zuora unveiled the “charge model builder” at Subscribed, which allows the customer to set up pricing models on the fly so that it can deploy packages and pricing quickly. Zuora also reports that 30% of customers offer usage-based pricing today.
The Subscribed conference is typically an excellent forum for sharing best practices, and the sessions on pricing and packaging usually have high attendance. Some of the key pricing topics expanded on at Subscribed were:
- Earning customer trust with pricing transparency
- Offering a growth path via clear and differentiated pricing and packaging
- Maximizing customer lifetime value via renewals and upsell
- Providing a consistent customer pricing experience across channels
- Enabling pricing flexibility through people, process, and technology
- Supporting the ability to rapidly introduce bundles and pricing and to iterate quickly
Enable Every Team
Companies with a history of selling products often find that their systems encourage “siloed” thinking. This results in a fragmented view of subscribers and, ultimately, a poor customer experience. Turning transactional customers into long-term subscribers requires a companywide orientation around the subscription model, and Zuora executives took time at the event to lay out how subscription models impact different roles within a customer organization. This included a description of the benefits that Zuora can offer to specific departments including product management, sales, customer success, finance, and IT. A breakdown of some of the key features of the platform and how they align with different teams or departments includes the following:
Product:
- Subscriber usage patterns and trends
- Dynamic customer groups based on common behaviors
Sales and customer success:
- Measuring net retention based on cohorts; as business moves forward, segmenting data
to make sense of trends - New operational reporting across bookings, billings, and cash
Finance:
- Complete redesign and revamp of Zuora’s reporting engine
- New reports to accelerate revenue and month-end close
- Recurring revenue metrics like ARR, MRR, and net retention
- New drag-and-drop report builder
IT:
- Universal Data Connect Framework — enabling Zuora data to be easily shared with frontand
back-office applications - New and notable additions to RBM Connect Marketplace (SteelBrick integration, Oracle
Connectors, Lockbox applications, etc.)
Scale Globally
Zuora’s customer list consists of many large, multinational organizations. While having a single view of the subscription business (or businesses) in the context of the larger organization is important, it is also necessary to have the flexibility to support entity separation. At Subscribed, Zuora announced a new edition that will enable customers to create an entity based on users, geography, invoice number sequencing, or whatever is meaningful. The system will offer rollup reporting across different entities as well as entity-specific accounting close cadence.
Future Outlook
Subscribed attendees represented a diverse set of industries with one common thread — they are using a subscription-based business model to help hone their ability to provide success outcomes, not ownership, for customers. To achieve this, they are using a digital foundation to deliver a customized and personalized experience to customers that evolves and adapts to their needs.
Zuora recognizes that in order for companies to reorient themselves around customers, rather than products, there are people, process, and technology changes that are required. While Subscribed does showcase Zuora technology, the conference focuses just as much on people and process — maybe even more. Tzou talked about eight growth strategies for subscription businesses in his keynote:
- Sign up new customers for a new service.
- Expand into a new geography.
- Move into a new segment.
- Launch a new pricing model.
- Cross-sell or upsell new offerings.
- Reduce churn.
- Grow your sales team.
- Acquire or spin off business.
When business model innovation is done right, it can create a more valuable business than the one of the past. However, before the innovation represents a significant amount of revenue for the company, someone has to believe in it, and the company needs to adopt a different set of metrics to measure success, such as the cost of customer acquisition, average revenue per unit or customer, and customer lifetime value.
For Zuora, a successful customer outcome is a thriving subscription business. The number and diversity of customers featured at the Subscribed Event, as well as the focus on all aspects of subscription success, showcases how sincere Zuora employees are when they talk about delivering outcomes, not ownership.
Want to get closer to your customers and start turning your customers into subscribers? Check out How Zuora Built Customer Success.
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