2025 Subscription Economy Index findings and insights

All right. Welcome, everyone. We will get started. I am really happy to be here and to walk through our latest 2025 Subscription Economy Index, or as we like to call it around here at Zuora, the SEI. This is a, really for us, an iconic, uh, moment in the year where we unveil our latest findings from our Subscription Economy Index, which is an incredible set of data and findings from real companies and real business results. And in today’s times, with so much change, with so much going on, and, and, you know, frankly, a lot of excitement and trepidation, I think it’s always exciting to get grounded in the reality

of what businesses like yourselves are doing to find growth in these turbulent times. So, I am Amy Connery, I’m the founder and chair of the Subscribed Institute here at Zuora. I am joined by David Warren, who will be speaking in a while. Um, he is a principal strategist with our Subscribed Institute, and we together work with many of you, uh, personally as you, uh, work through the, the challenges and opportunities that you or business is facing with recurring revenues. Little bit of housekeeping, um, just for those of you that aren’t familiar with the Gold Class- Goldcast platform. Um, there is an opportunity to share questions in the chat as you think of them.

We’ll be answering them as we go in real time, and we’ll also, if we get to it, uh, save some time in the end, uh, for a little bit of questions. Feel free to introduce yourself. We’re expecting a good-sized group here on the live webinar today. Introduce yourself, where you’re from. Uh, we will also be launching polls later on in the presentation, so feel feet- free to participate in those and, and share your thoughts. Uh, there’s also a docs tab. So here at the Subscribed Institute, we’re big on research, we’re big on, uh, thought leadership and content, and so you’ll find some additional resources in that docs tab. Uh, there’s also an opportunity to continue the conversation after this presentation, and you’ll see that Talk to an Expert tab is an opportunity

to do that. And then finally, uh, we are recording this session. I hope that you’ll join us for the live session here for the interactivity. That’s the bonus of being live. But for those of you, uh, or of your colleagues that aren’t meet- are able to make it live, we do like to make this, uh, session available afterwards to listen to on demand. And so feel free to join us in that way. So before I launch into this, these findings, there are a couple th- of, uh, additional housekeeping things that I need to do. One of them is to show this forward-looking statement. Uh, Zuora is, uh, is a software company. The Subscribed Institute is Zuora’s think tank. We aren’t going to be talking about, uh, Zuora’s specific products or capabilities.

That’s not the objective of this session, uh, but it is important to know that, uh, when you are talking with a company like Zuora that you’re making decisions, um, based on, on products and when they’re available. So like again, not the point of this presentation, but I wanted to make sure to call that, that out. So let’s go to the actual point of this presentation and the agenda. So the first thing that we’re gonna go through is, is introduction and market context. I’m going to talk through that. Then I’m going to turn the, the stage over to David Warren, who will be talking through the key findings and some of the trends and strategic takeaways. As I promised a moment ago, uh, we will save some time in the end either to pull out some of the provocative questions that we’ve gotten in the chat or for

some, um, live Q&A to take place at that moment. We do wanna make sure that this is as discussional as possible and in- interactive as possible, but it’s also the format in and what we are going through, which is data and findings, does lend itself to a bit more of a presentation-type format. So we’ll be doing some of that as well. So before we get into the findings, a little bit about Zuora. As I mentioned, we’re a software company. Uh, many of you, uh, who are likely attending this presentation know who we are. Um, I joined Zuora just about eight years ago because I was really excited about the way that the company was helping some of the most innovative companies in the world really evolve their business models, uh, and, and,

and compete and find growth as their industries were changing. And I say as their industries because Zuora is working with companies across many, many industries. We have a lot of large companies we work with. Um, 26 of the Fortune 100, uh, lots of manufacturing companies, media. We work with, uh, over 600 companies in the high tech industry. You know, this is important even though we’re not talking about Zuora’s software. When we talk about the Subscription Economy Index, it’s really important to know what types of companies are represented, because the subscription and eco- subscription economy index is in fact an anonymized and aggregated view of these companies. So it is

a representation of real companies that are using software, uh, Zuora software specifically, to help them monetize their products and services. And because of that, we’re able to look at an anonymized and aggregated way, at the companies that are represented, um, up on this screen as well as many more. So as we talk through the data and the findings, you’re getting real company data, real company findings. It’s very difficult to get that any other way. Surveys, et cetera, are difficult because you’re relying on people to remember or to be truthful. We’re looking at actual business results from companies. And that brings me to the Subscribed Institute. You may have seen when we did the, the bio slides for both David and myself.We

have Subscribed Institute listed. So, because Zuora has this incredible data set, and because Zuora works with some of the most innovative and iconic companies in the world, uh, we’re in a- a- a great position to surface data insights, to surface best practices, and to connect people to one another to help them work through some of the challenges and opportunities that they might face as they, uh, you know, look to continue to lead in their industries. So, we launched, in 2018, the Subscribed Institute, which is the think-tank, uh, designed to help our community, which we could say the community is the subscription economy. Of course, I’ll talk a little bit about subscription economy

and what philosophy that means. It’s much broader than companies that simply do subscriptions. Think recurring revenue models, think consumption, think outcomes. This is all represented by the work that we do in the Subscribed Institute, and we do- we have, uh, research that we publish, which you’re gonna be hearing about momentarily. We do events, like the one that you’re attending right now. Uh, we also have live events that we do, and we also have a community. The Subscribed Institute is a membership community where we have, uh, many, many people like yourself. Um, many of you may be members of the Institute. If you’re not, uh, you can, uh, go to the resources tab and, uh, find out how to do that. So, lots and lots of engagements, lots and lots of data, uh, informs the work that we do. So,

I wanna set the market context for what we’re going to be talking about now, um, and I’m really been spending a lot of time, um, reflecting on where we are in the market. Uh, not only because of everything that’s happening with AI and how it’s blowing up the software world and many other industries, but because when- when I started the Subscribed Institute, and when I started with Zuora, we were talking about this idea of the subscription economy being something that was a future state, and our mission at Zuora, as a company, is the world subscribed. Well, we realized that the subscription economy, in fact, is here. We are- we are all living in the subscription economy. And so, that’s very meaningful as we start

to talk through the Subscription Economy Index, because while it used to be something that was futuristic and a small set of companies, it’s in fact representative of the, uh, you know, the- the most successful companies in the world. In fact, the most successful companies in the world are participating in the subscription economy, which is why we predicted the growth of the subscription economy originally. Uh, it’s opportunity for growth, opportunity to be customer-centric, and really opportunity to align your business with where your customers and where the opportunity is. Now, it’s important for me, at this moment in time, to really call out and remind myself, uh, as well as, uh, as you folks

on the call, what the subscription economy idea was about. And I’ll tell you something, it was never about subscriptions. And this is important to call out, because we’re at a moment in time where, um, you know, subscriptions, in many cases, are done the wrong way. Absolutely done the wrong way. And a lot of the growth opportunity is, in fact, coming from recurring revenue models that have usage, consumption, and even outcomes tied to them. And these aren’t always closely associated with the word subscription, although they have always been part of the subscription economy. Because the subscription economy was not about subscriptions. The subscription economy

was, in fact, about putting your customer in the center, and about creating a business model that allows your customer to consume what they want, when they want. Of course, we’ve evolved to where they want over time, as increasingly products and services have become digitized, and mobility and cloud have become ubiquitous. So, these principles, just really thinking the subscription economy, not about subscriptions, but in fact about being customer-centric and customer-centric business models is really important as we start to talk through monetization approaches. Because when you see the growth that we’re gonna talk about in the Subscription Economy Index, this growth isn’t simply coming from, say, seat-based subscriptions

or per user subscriptions. This growth is coming from a combination of business models. It’s coming from business models that allow people to access products and services, business models that enable you to use an experience, and in fact, business models that allow you to create an outcome. And I have three images here, thinking about how you might access a product and service. It’s- it’s- it’s something I have. Either I owned it, or I subscribe to it, and I have the thing. And I’ve, perhaps there’s been a monetization model that allows just simple access of the thing. Then there might be a monetization model that charges based on the usage or based on the experience, and then finally, there might be something, uh, that allows me to price based on the outcome. And when I used to do

early presentations, uh, on the subscription economy, 2018, 2019, we used to use this example, because we’d say, “People don’t wanna buy guitars or own guitars. They wanna become rock stars.” And that was true today, and it’s, uh, true yesterday, and it is true today. And so, as we think about, again, going back to the fundamentals, it’s what are our customers trying to achieve? And that’s obviously a consumer example, and, um, it might not be the reality today, that you could pay for a guitar based on whether or not you are a rock star on stage. I don’t think that model exists today. It would be kinda cool if it did, ’cause that’s my personal objective. But it does absolutely exist today, and I wanted to just call out one example, um, of a company,

John Deere, that’s taking that customer-centric mindset and that’s applying it to business models, allowing their customers to…… access capabilities through JD Link connectivity, allowing the, um, the customer to pay by usage in the operations center, and then with an innovative outcome-based model that allows the customer to pay based on the amount of weeds that are sprayed with, uh, a weed mitigator or weed killer, uh, solution. So, these types of business models are what we are talking about when we are talking about the subscription economy, and this is what’s representative when David is going to be talking, um, really shortly here about the types of approaches that are, in fact, driving growth. So, if I leave you with

one thing in this, uh, market context and, and introduction here, it’s that subscription economy principles are growth principles. But they’re not growth for the sake of simply growing, um, you know, m- making it hard for customers to cancel subscriptions, or, uh, you know, creating offerings that, uh, are, are, you know, make it difficult for customers to, to access the functionality that they want ’cause it’s in a different tier, et cetera, et cetera. It’s about a growth principle alongside a customer-centric business model. That’s been the point all along, and that is what we see play out when we look at the companies and the approaches that are really driving sustainable growth. So, with that, David,

I am looking forward to turning it over to you and hearing you talk through some of the and the rest of the day. Great. Thank you, Amy. Appreciate that. Hello, everyone. Nice to be with you today. Um, I’m gonna start with our key themes, especially for our folks here who might have a short attention span or can’t spend all the time with us and just wanna get the headlines from the SEI. So, we’re just gonna zoom out for a moment. The big question we asked going into this year’s SEI was, what separates the companies that are still growing in a relatively tough environment from those companies that are just standing still? And through the data, over 600 companies, thousands of monetization events, and consumer sentiment by, uh, our consumer Harris poll we

ran earlier last year, um, we saw a pattern emerge. Not just what’s happening, but in how leading companies are choosing to grow. And so there’s three themes that we’re going to unpack in the, this second half of the session. The first one’s gonna be about embracing flexibility. So, not just in pricing, but across systems, operations, and how value gets delivered. Um, the second theme is around finding the right mix of revenue models. Because a one-size-fits-all subscription approach is now giving way, and frankly has been giving way, to a more diverse set of revenue models that all work together. And finally, tailoring and balancing the, um, product portfolio

to keep buyers engaged, drive ARPA– you’re gonna hear a lot about ARPA in this call– uh, and reduce churn. So, each of these is a lever that finance and strategy teams can pull today to build a durable, um, acceptable, uh, adaptable growing business. So, those are the headlines. Let’s dig into what the data is showing us. But before we do, I see some of you have been chatting, but we want to get more of you involved. I’d like to get a quick read from the group, see how many repeat audience members we have in here, so we’re gonna throw up this poll. How many of you are familiar with the Subscription Economy Index? Take a second. Let us know, ’cause it’s gonna help us tailor our commentary as we go.

All right. We’ve got a f- got some newbies, got some veterans, got some people who have heard about it but have never been here before. Looks like we have a 33/33, almost like a split into thirds. All right, perfect. So, we got a little bit of everyone. We have a mixed portfolio of folks. All right, so let me advance here. Okay. So, um, first chart, what did we find this year? So, let’s start with the big picture. Now, it feels like every year that we’re always talking about disruption and market uncertainty. And if we had a year without disruption and uncertainty,

that would probably be a disruption, but last year was no different. Doesn’t look like this year is gonna be any different. So, despite ongoing market uncertainty, the subscription economy continues to outperform. So, over the past two years, SEI companies have grown revenue faster, much faster, in fact, than the S&P 500. And last year in particular, we saw 16.5% revenue growth, which represents a pretty sharp acceleration from the previous year, which for some industries, not all, was a bit of a, “Hey, let’s take a pause and figure things out and get back to profitability, not just growth, and figure out what that balance is.” Um, and that is sending us a strong signal that this model isn’t just resilient, but it may be gaining momentum.

And also, while there are a lot of B2B businesses in the SEI, it’s important to note that despite some of the headlines that we all read last year about the death of subscription, we did run a tour, a tour, we did run a poll with the Harris poll, and we found that 68% of consumers signed up for a new subscription in 2024. So, that demonstrates a pretty massive demand in a year where wallets were tighter and expectations were a bit higher. All right. So, another poll. Thought you were gonna get away with just one. You heard Amy share that the SEI is not just about, uh, subscriptions, but it’s about creating and nurturing a recurring relationship with customers through

multiple types of models. So, we’re curious to know which revenue models does your company use? So, we’ll throw up another-… poll here. Please let us know in the chat if you wanna give us any more detail about how that’s going. All right, pretty subscription-heavy group. We got some usage folks, not surprising. Still some one-time transactions. I imagine some of these, just judging from the numbers, some of you have multiple models, so we might be seeing some people that have both subscriptions and usage and one-time. That’s actually pretty common. But it looks like we have a pretty heavy foundation of subscriptions here. Advertising,

five other. Would love to know what other is. Let us know in the chat, uh, for those of you that are marking other. It’s always interesting. All right, I’m gonna keep it going here. So, um, let’s talk about diversified or hybrid revenue models. This isn’t a new topic. We started talking about this couple of years ago, but this is a shift that’s become a pretty clear growth lever. So over the past year, companies using multiple monetization approaches, whether that’s subscriptions, usage-based, one-time transactions, whatever other is, um, maybe outcome-based models, tended to outperform their peers across the board. And so why is that? So these companies are… they tend to, um, be able to respond better

to external pressures and disruption by making pivots on how they price to protect and grow their customer spends. So whereas in the past, the objective might have been how to price a single product effectively, whether you’re doing it on a one-time basis or maybe you were pricing something in a more dynamic manner. Today, it’s still about that, but it’s also about finding the right mix of revenue models for your buyers and all the use cases that you serve, particularly for multi-product companies. Less important for single product or single-offer companies. And that mix is provi- is, um, is proving to be a very powerful hedge against churn. So nearly half of top performing SEI companies

now use hybrid revenue models. And on this chart, if you look to the right, we have companies with, um, four or more revenue models saw 2.3% ARPA growth versus those that only had two or three revenue models, who actually started to, who struggled to preserve their existing ARPA. Um, and for those companies that just had one revenue model, which is the bar in the far left, they actually experienced negative ARPA, most likely because the only lever that they have, uh, to reduce churn is to head off discounting. And of course, if they want to preserve the bottom line, that means they have to constantly focus on new customers. Every company does, but, um, especially those companies that have less, uh, fewer revenue models.

All right, and then we also, this time, uh, this year, we are introducing something a bit new that we’ve never shared through the SEI before. Um, and it’s a new metric that we’re very excited about, because we think it opens the door to new conversations across, uh, shall we say, functional boundary lines about the health of a company’s recurring business. So if you think of your product portfolio like a buffet. If you only serve one or two dishes, you may have some people that come back, but you’re not appealing to everybody’s tastes or appetites or desires. On the other hand, if you overload the table with too many options, it can get overwhelming, become harder to manage, and people might just grab,

you know, a soup and a salad, and then they skip the rest, which then leaves you with a lot of leftovers. And we’ve been hearing for quite a few years now that product catalog overload, SKU proliferation is a problem both for companies who have to manage the catalog and for customers who have to navigate all the different options, whether it’s via a self-serve model or a sales assistant model. But the most successful companies in our index have found that sweet spot. Um, it’s a balanced, curated menu. So they offer just enough differentiate- differentiated products or services to meet a range of needs, but not so many that they tend to dilute value or confuse the buyers or, or even the

sellers. And that is what we call the Product Portfolio Balance Score, the PPBS if you’d like. It measures not just how many items are on your menu, but how well those items are performing, how often they’re being served and enjoyed. So companies that have higher PPBS scores are seeing stronger ARPA, because customers find what they want and they keep coming back for more of whatever that product or whatever that offer or service is. While companies with lower PPS, PPBS scores are either not offering a broad enough range of offers or they’re treating every deal as a snowflake, and they’re creating one-time SKUs that get

sold maybe once and then they’re never touched again. And our data backs this up. SEI companies improve their PPBS by 118% over the last four years, which tells us that companies are naturally kind of figuring this out. They’re not waiting for someone to come up with a PPBS score to figure out that they have a problem, but they’re starting to sense this, and they’re making the adjustments. And so this is a direct result of listening to usage patterns and adjusting the menu accordingly. Um, so I have a question for all of you, and we have one more poll here. How often is your organization revisiting its product or pricing catalog?

Because what we’re seeing in the data is that it’s clear, is that companies that are treat- catalog optimization as a, as an ongoing discipline, not just a-… one-time-a-year activity where we bring together finance and sales and product and try to figure out what do we need to cut or hedge. Those are the companies that are pulling ahead. And so it’s not just about the volume of changes, it’s about, um, a mindset of being very data-informed and iterative. So how often are you refreshing your buffet? Let’s see. Quarterly, annually, okay. See a lot of once a year. Only when growth slows, one vote. Rarely or never, four votes. Okay. Probably wanna take a look at that, maybe up it a little bit. All right, looks like most companies are looking at it on an annual

basis. Interesting. Um, if we had another poll, um, we’d probably wanna ask you something about, hey, would something like a PPBS, um, conversation actually help, um, uh, with those negotiations that you might be having indoors? And, um, maybe we’ll talk about that next year during our next SEI report. All right, let’s move on. Let’s go to the next. Let’s talk about industry, because everyone’s interested in how is… How am I doing compared to my peers? Um, so while the, uh, subscription economy overall continues to grow, the story does tend to vary a bit by sector. So SaaS had a very tough 2024. Um, had an even tougher 2023.

Growth was relatively flat as companies across the board shifted from more of a growth-at-all-costs mindset to a more disciplined focus on profitability. Um, but here’s the good news. Um, we are starting to see signs of a rebound, potentially. Uh, many SaaS leaders are finding smarter ways to bundle, to price, to align with customers on, um, what they value, not just what supports their COGS model, and it’s beginning to show in the numbers. So we’re starting to see some green shoots in SaaS, which is, which is good news. Uh, in manufacturing, the growth story is a little bit more nuanced. Uh, this category is heavily weighted by auto manufacturers, and last year they had a,

uh, fairly strong year in terms of vehicle sales. It was lopsided from, um, company to company, but overall, uh, it was a good year. Um, that gave them a larger base to sell into, um, and what we’re hearing from is that things like software-enabled services, IoT, infotainment starting to gain more traction. And we’re also hearing that there is, there’s more headroom to grow. Manufacturers, all of them frankly, are actively working to get more of those dealers selling those digital services, um, before the car rolls off the lot. Uh, in many cases those services are being sold after the customer, um, takes the vehicle home. And then media, a bit of a surprise, especially

streaming recovered quite strongly, um, from what was a really rough 2023. Um, a big part of that rebound came from smarter programming strategies. There were some bold bundling moves, bundling moves that we saw from some of the bigger players, um, what some of us are calling the, the mega-bundle or the super-bundle. According to our Harris poll, 38% of US consumers signed up to a new streaming service in the last year, which kind of flies in the face of all of the themes and the rumors that we were hearing is that people were shedding all of their streaming services. Actually, it wasn’t the case. So while churn still remains a concern for these companies, um, strong content and pricing creativity are bringing people back in.

So the bottom line for all of this, regardless of sector, the leaders, uh, in each of, um, these industries, they’re finding growth by aligning monetization strategies with how their customers are buying now, not how they bought three years ago. And they’re willing to, um, uh, introduce some pricing model innovations and experience innovation and more, most importantly, um, iterating on that model to improve over time. All right. So that’s the bulk. There’s obviously, there’s a lot more if you wanna dig in a bit more to the details. Um, we do have the report, which is available to you. Um, but just to recap, as Amy shared, the SEI is not just about subscriptions. It is a roadmap for growth. It has always

been a roadmap for growth, and there are some guideposts, some of them new, to keep in mind as you’re, um, traveling that, that road to growth. First one is embrace monetization flexibility. Don’t overfit to a single model. Adaptability is your growth lever. Um, hybrid revenue models. Realize not every company can introduce it, but if you do have the opportunity, it is worth it, especially when it comes to, uh, improving ARPA by introducing new options for how you charge your customers for the services you provide. And then lastly, tailoring your products portfolio. Thinking about that buffet. Use data to simplify where it helps, um, to inform those negotiations

that are happening between sales and product and finance, and think about expanding where it drives value, and of course, iterating continuously. And with that, I think we’ll jump into questions. Um, remember, SEI isn’t just a report, it’s a benchmark for what’s possible. There’s always questions when we get into possibility thinking. If you’d like to go deeper, whether it’s looking at your own, um, products portfolio, bala- balance score, exploring new monetization models, or pressure testing your pricing, um, we’d love to talk. So what questions do we have?Thanks, David. Um, it was really great to hear you walk through that. I’ve been keeping an eye on the questions that have come in

from the chat, and there’s one from Greg that I wanted to ask you. Um, the question is, uh, when we’re talking about the product portfolio balance score, whether we looked at the data, uh, B2C versus B2B. I- I- I think we saw the same, uh, across the board, but I- I just don’t… I don’t know if you had done that analysis as part of that score, and- and if- if… what we found in general. Um, we- we did at a very, very high level. I- I’d say one… I’m gonna say this is a hypothesis because it’s not, it’s not a takeaway just yet ’cause we wanna validate it a bit more, but media companies, let’s, um… Publishers in particular who may offer one product, one magazine, newspaper, digital,

uh, you know, uh, digital media service who have maybe a good, better, best or just a good, better pricing model, a PPBS is really not all that helpful, right? Because you only have two prices, and so, um, you’re already pretty low, and so the- the- the score skews a bit lower. It’s m- a much more effective indicator for companies that are perhaps… and we didn’t isolate each company, so I’m just speaking in examples here. But at New York Times, which sells a range of different ways because they have a newspaper, they have a games package, they have a sports package, and then they have bundles across the board, a PPBS would make more sense for a media company like that, um, which is, uh, B2C. And then in B2B, it- obviously, it’s a, it’s a really strong indicator

because those companies tend to be for small multi-products. Uh, they tend to have a sales-led go-to-market approach, although sometimes they also have a self-serve model. And so in that case, actually something like a PPS is- PPBS is really helpful because there are so many SKUs that are flying around the product catalog and being introduced. So hopefully that answers your question. Yeah, and- and just to add some color to that, I- I was talking, um, with one of our experts in Australia about what types of things she’s seeing there with the SaaS companies that she’s working with and what kind of questions are coming in. And there are a lot of questions, and I know you get a lot of these too, David, on bundling and unbundling, and, you know, “What should be in my bundle?” and “How to create the bundle?” And,

um, I’ve been thinking about that a lot in- in… with the product portfolio balance score, because I think, you know, again, I know this purpose of this, uh, this session is not to talk about Zuora, but when you do have a technology that allows you to be more flexible in how you create bundles without having to create different SKUs for every possible configuration and sort of hard coding that in a product catalog, when you have more flexibility, you can achieve the same type of result that you would be achieving if you’re trying to balance your product portfolio. So it- it- it feels like definitely a hot topic is what- what is the right way… If I have a number of capabilities, what is the right way to package and price that in a world where, look, we’re talking about customer centricity, and- and people and customers are all different,

so how do you balance being customer-centric with the fact that the data shows, um, that you need to really closely manage your product catalog and- and, you know, the way that you do that, I think is- is with smart management as well as with automation? I think that’s the lesson there. So another question here, there’s one from Sarah on how much does usability experience impact conversion in ARPA? Sarah, I think that you may be talking about the usability and experience of the product. Um, I don’t know if there’s a way for you to… i- if that’s what you’re talking about there, or if you’re talking about the usability or experience with the monetization model. So it might be a slightly different nuance. I don’t know if you could

type in the chat which one you mean. Um, the product. Okay. I was gonna say, I’m gonna work on the assumption that you’re talking (laughs) about the product, but I didn’t want to go off in a direction if that wasn’t the right one. Um, gosh, I mean, I- I think that’s- that’s everything. I mean, we’re- we’re talking about monetization models here, but those are not a replacement for good user experience, good usability. You can have the perfect, um, you know, way of- of pricing and packaging something, but the actual experience is really terrible, and you- you might have customers… I can think of personal examples of this, like where I really wanted the service to work ’cause I loved, um, the way, the- the innovative way that it was priced or packaged, but in reality, it- it didn’t deliver, and so I went

back to, um, a- a different approach. Um, we don’t have within the SEI data the way of… uh, a way of looking at or rating the usability of the- the companies whose data is included in the SEI and kind of doing analysis on that, but I- I would say just a- absolutely, it’s really important that you’ve… your- your customer centricity extends not just to how you, um, price and package or monetize, but also, um, to the features and, uh, the way that customers are able to access and experience those. Um, David, I don’t know if you’ve got any additional commentary on that. I- I would add just one more point. I think it’s a great question, Sarah.

Um, and I think these worlds are coming together where we’re talking about the product experience, and then we’re talking about maybe the buying and the paying and the monetization experience that I’m having as a customer. For companies that are starting to get into the usage game or outcome-based, um, models, the- these two things are becoming enmeshed, right? Because you constantly have to pay attention to, is the customer getting value out of the product and experience? Especially if you have some sort of, you know, um, prepaid drawdown where a customer’s expecting to use your product and your offer, um, a certain amount of time within a given timeframe. And if that usage starts to drop…… um, pretty quickly, then you may have a non-boarding issue. If it drops,

um, slowly but steadily over time, then you might have an effectiveness issue, or you might have an experience issue. The good news is, um, as these two worlds come together, for those of you that are into usage or output-based, you have new indicators that… and new flags that you can look for, to let you know that the customer might be struggling and having a problem, which gives you an opportunity to dip in, check in with the customer, make sure that they’re getting value, see if they have any questions, and head off churn a bit quicker. S- so David, I’d love for you to elaborate on the last sentence that you just wrote, because I think it’s, um… dovetails with a question that Gavin has around the key metrics beyond ARPU and LTV. And, um,

you know, it used to be that those were visionary metrics because they were predictable, they were forward-looking, as opposed to the backward-looking metrics that we had 20 or 30 years ago. Um, but as those, the convergence of, uh, usability and monetization and outcomes and monetization, um, is becoming a reality, I would expect that those metrics are gonna continue to be what most CFOs are considering r- bread-and-butter metrics, but they’re additional things that we’re looking at. You alluded to that, Dave, but I wondered if you could expand on, uh, on what you’re thinking there. Yeah. Uh, well, I- I’m gonna go one step further, rather than just repeat what I said, which is, uh, so one, one great question we got from a customer not too long ago was, “When I look at things like…” We’re bundling a lot these days, because we have so many

new offers. We have customers that might buy something, a one-time setup fee, to use Gavin’s SaaS example, and then I’ve got a subscription for this service. Oh, and then I’ve got this add-on or this feature that I’m paying, uh, for on a consumption basis. Now, it’s all bundled together, um, and I’m giving discounts on the, on the usage, and maybe I’m giving away the platform set-up fee. So my standalone selling price or my average selling price is changing. The longer I’m in market, should the average selling price and the standalone selling price go up, or should it go down? And which is an interesting question, but I think the right answer to that is, it should change, and you should always be aware of how

is it changing, and you should always look at average selling price, standalone selling price relative to your margin. And again, I’m kind- I’m, Gavin, I’m sorry. I’m ex- I’m ignoring the OEM part, not on purpose, but SaaS companies in particular, who are having to focus a lot more on profitability, are leaning in a little bit more to protecting usage, uh, pricing as much as possible, because that seems to be where the margin is. It’s, and it also can be a margin threat, especially because a lot of these usage-based products are AI-enabled, and the cogs on the AI is a lot higher. So, they don’t want to discount the usage. If anything, they’re much more willing to discount the hardware, the, the

set-up fee, uh, maybe the subscription that gets you access, um, and trying to preserve SSP, ASP margin for anything that’s usage basis as much as possible. I’d say that is also true for the OEMs that are selling software-enabled services. Maybe more true for B2B, so fleet management services or, um, tools that may become native, not native, but may- may be offered as an add-on for small business owners who are buying maybe five or 10 or maybe 100 trucks. Um, that, that, it would also play in there as well. Super, super helpful, David. And- and I

think, y- you know, one of the things that I was thinking of as you were talking is to make sure to mention, you know, right, right here, we are all coming together to talk about the SEI, and there are so many different directions that the market, that companies are taking the Subscribed Institute. Um, so many interesting things happening as far as the, the rise of AI, um, what that’s doing to the economics in industries like SaaS and every other industry, of course, and how that’s imp- impacting monetization models and growth. We’re looking at all of these things in the Subscribed Institute, because this is, you know, everything that we’re talking about here is impacting, um, the subscription economy and, and the companies that we care about and that we serve. And so I would say if, uh, if any of these topics

here, uh, spark questions, we do have a lot of resources on, uh, additional topics like monetization of AI. We’ll continue to do research, um, as everything’s evolving as quickly… The SEI tends to be an annual report, but we’re certainly really active on the, uh, in the in-between times, trying to, uh, support, uh, and, uh, companies and also identify, uh, areas that we can get out ahead of, um, where the market might be so that we can help advise companies effectively to go where they need to go. So, I think it’s a good time to, to start to, uh, to close things down. I just wanna thank everyone for your time today. Thank you, David, uh, and the extended team. There’s a really large team that works on the Subscription Economy

Index, everything from data science to content, um, obviously, to, to, uh, to our Subscribed Institute strategists here come together and work on this, and so it’s a really fun project to be a part of. And, um, it’s been really great over the years to see all of the changes and to continue to see the changes that are happening. Um, so thank you and, and David, I don’t know if you wanna say a few closing words, and then we’ll let everyone go. I, I, I got a couple of, uh, direct, uh, messages around, “Hey, David, what’s ARPA?” I’m too embarrassed to put it in the chat. So it’s, it’s average revenue per account. You will also see ARPU, average revenue per user. So sorry, we, we might’ve been a little acronym heavy, and I didn’t take the time to clarify that. Thank you, thank you. All right. Never feel embarrassed to ask

us any question, um, for sure. I’m glad that you got those messages, David, and, um, thank you to everyone for joining. I appreciate it. And enjoy the rest of the day.