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March 25, 2015

Why Innovation is Key to Subscription Success

Building a business around subscriptions is not as simple as it sounds.

By Cbr Rolling Blog

Subscription services are becoming increasingly popular as businesses strive for more predictable recurring revenue streams, to drive customer engagement and take advantage of new cross-sell and up-sell opportunities.

Unfortunately, the reality is that building a business around subscriptions is not as simple as it sounds. For a start, most new businesses begin with a basic concept which is easy for customers to understand and adopt. However, this often means that it is also simple to replicate and will draw competitors to the market like a magnet. These will tend to undercut on price and differentiation becomes hard to achieve.

So, time to market and being able to easily manage the product lifecycle both become critical. No sooner have you launched a new offering, than you need to know what’s coming next and how to evolve your product or service to stay ahead of the competition in terms of features and pricing.

However, innovation is not always fuelled by competition. Instead, the primary driver is often increasing service adoption or taking advantage of opportunities to enter new markets. Just look at how Amazon has gone forward with its Prime membership subscription. Amazon Prime was originally introduced to provide free (and fast) delivery of millions of its products for a simple annual fee. The idea was that by offering free delivery, they were increasing the likelihood that customers would buy from them regularly, rather than selecting another online retailer for some purchases.

The challenge of course became how to tempt the occasional user into paying an annual fee for the premium delivery service. The solution was to start bundling access to other services as part of the subscription, firstly with Amazon Prime Instant Video which put the company head-to-head with Netflix, and most recently with the launch of Amazon Prime Photos which offers ‘free’ unlimited photo storage, competing with other paid for cloud storage services. So Amazon has created much more value in its ‘membership’, from what started out as an enhanced delivery service.

Finding Success in Subscriptions

Long-term success is about responsiveness to the needs and opportunities of an evolving market. The problem is that traditional on-premise billing systems are typically either too expensive to implement or not agile enough to support this goal. That’s where cloud-based alternatives can be so effective in delivering the flexibility and agility organisations need to commercialise new ideas.

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The latest cloud billing solutions evolve as your business grows, providing access to new features and enhancements automatically as part of regular software updates, driving greater business agility. That flexibility allows you to continue innovating over the long-term and deliver sustained value as your business expands. This may include bundled services and pay-per-use offerings as well as a variety of different billing frequencies and payment options, for example.

In many industries, companies are feeling the pressure to innovate and trial a subscription model. Ultimately, however, success will depend on the ability to rapidly monetise new service offerings. To achieve this, businesses will need to make it as easy as possible for their customers to engage with them, which in turn will create the end result of customers spending more money.

Cloud billing can play a key role here, slashing the time taken and the cost incurred in setting up new services and giving businesses the opportunity to quickly turn innovative ideas into monetised solutions. Implementation can be done in-house in a matter of days or weeks, and businesses need only start paying for the application once it’s being used commercially.

For businesses intent on using the subscription business model to drive innovation the great news is: no longer are their existing billing and pricing models a barrier to accessing this huge commercial opportunity. Now, thanks to the emergence of cloud-based solutions, billing has become a facilitator of innovation for these businesses instead.

By Louis Hall, CEO, Cerillion Technologies

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