Marc Gagne joined Zuora as the General Manager of the company’s Asia Pacific operations late last year. He has behind him 20 years of experience within some of the world’s largest and best-known SaaS companies, including leadership positions at Omniture, Adobe and Salesforce. Most recently, he was Vice President for the Asia Pacific & Japan at PagerDuty, an operations platform provider whose global clients include Netflix, the BBC and American Express.
Hi Marc. It’s great to have you at Zuora. What brought you to the company?
I’ve been working with subscription-based licensing models in software since 1998. In those 20 years, it evolved from a disruptive approach to a mainstay. I continue to see subscription management and billing as a growth category. In my view, over time nearly everything we consume will be as a service.
Zuora initially rose to my awareness as I realised a lot of the companies I worked for and partnered with were running on Zuora. As I looked deeper into Zuora’s role, I realised Zuora was key in improving the customer experience. Zuora was helping my previous employers shift to self-service models, allowing them to easily experiment with new pricing structures and fully automate everything from billing to collections; revenue management to quoting.
And why do you think the model that Zuora supports works so well?
It’s a win-win-win: for customer, vendor and end user, validated by the fact that the vast majority of major tech companies have gone from a transactional to recurring revenue model. The nature of a subscription model keeps the vendor and the customer in better alignment than the transactional model. Over time, it’s proven that subscription offers better value for all parties.
Under the transactional licensing model, a company was motivated only to help a customer when an upgrade was required, but that’s not the case with the subscription model. When structured correctly, subscriptions offer a clear, easy-to-understand model that’s aligned with the customer objective.
“Clear and aligned” is key to making subscription models work. Furthermore, you structure your pricing around growing with your customer – as a vendor, you’re incentivised and rewarded to add value. As your customer grows with you, you can ensure the required R&D, support, account management and infrastructure scale with your customers success. Subscription offers the opportunity for vendors and their customers to get on the same side of the table, to grow and evolve together, recommitting their vows every three to five years in the form of renewal.
Zuora talks a lot about the journey to usership being a crucial part of the Subscription Economy revolution. How do you think that journey is going for Australians?
I’ve worked in the United States and Australia, and I think Australians are leaning in on subscriptions differently to the rest of the world in some ways. Zuora’s most recent global survey by Harris Poll validates this. It also says that the journey to usership is happening quickly in Australia.
It found that 78 percent of Australian adults have at least one subscription service, up from 67% in 2018. That’s a very significant increase in just two years – it’s actually the equal highest growth rate in subscription usage across the 12 countries surveyed.
The survey showed more than an increase in Australian subscribers, though. It also showed that Australians are becoming less and less concerned about possessing physical goods. They favour access over ownership. And the economy is adjusting to this shift; companies are transferring from sell-and-forget product models to recurring revenue models, such as pay-as-you-go. And these models, as I mentioned, are built around the customer. There’s definitely no resting on the laurels of the initial sale in a subscription model. In order to win in subscriptions, vendors need to anticipate how customers needs will evolve over time and be positioned to meet them. The data produced in a subscription based relationship can facilitate this IF you devote resources to do the analysis.
We know everyone’s getting tired of talking about it, but 2020 was an extraordinary year. What did you take out of it?
It was an extraordinary year. It was a year of great volatility. But one thing I noticed is that as so many businesses really struggled to deal with the economic consequences of the pandemic, subscription companies, for the most part, were resilient. Many actually grew.
The Zuora Subscription Economy Index is a piece of analysis that tracks the growth of subscription companies compared with their product-based counterparts. In the most recent version of the Index, we found that subscription businesses outperformed the S&P 500 in terms of growth by roughly 600 percent over the last decade. In 2020, subscription business actually grew revenues by an average of 12 percent while S&P 500 sales contracted by 2 percent.
And this analysis, as well as the Harris Poll research, reminds us that this isn’t a business model just for media and software. Yes, when you think subscriptions, you might immediately think of Netflix or Adobe, but the world’s biggest brands in manufacturing, entertainment, music and technology – from Caterpillar and Fender to Disney and Apple – have all had enormous success with digital subscriptions. And all of them have achieved long-term growth.