Modern businesses are embracing and experimenting with how they think about business models and monetization strategies. Monetization is how businesses create value, bring that value to market, and generate and collect revenue from it. 

With the increased pressure and competition businesses face, they need new ways to grow. Retaining your existing customers is more important than ever. Retention as a strategy is about adding incremental value to customer relationships over time, and this is how you can continue to grow in today’s environment. 

Subscription models can provide predictable, recurring revenue streams, reducing the impact of seasonal fluctuations and economic uncertainties. The Subscription eCommerce industry has seen more than 100% growth every year over the past five years, according to a recent study by McKinsey. 

Businesses are moving towards consumer-centric models that prioritize customer experience more than ever. Subscription and recurring revenue models can increase customer loyalty through personalized experiences that foster long term relationships, leading to higher retention rates and increased brand loyalty. 

Watch this on-demand webinar to learn how to increase recurring revenue opportunities with Adobe Commerce.

From single transactions to recurring relationships 

These new approaches to business require a new way of thinking, but that doesn’t mean that your existing business model will necessarily go away. This is what your ERP was built to support, and you can continue to sell your one time products through your channels to reach your end customer.

However, as customer needs and expectations change, the winners are going to be those companies that can support a parallel and complementary business model for recurring revenue. You achieve this by building a recurring relationship with your customers through the services you provide, such as subscriptions, which leads to recurring revenue for your business. 

Companies that embrace this model are more resilient and grow more quickly because they put the customer at the center of everything they do and focus on delivering great experiences. 

Take the automotive industry, for example. 

If you’re an auto manufacturer, you’ve been in the business of selling cars as one time transactions for more than a century. Now while you will continue to sell cars, your future business growth will come from monetizing ongoing experiences and thinking through every aspect of the end-to-end driving experience. That might include everything from vehicle tracking to roadside assistance, preventive maintenance, covered insurance, and even tire and wheel protection.

As you transform from a product-centric to a subscriber-centric business model, you’ll need to adapt in other areas. How you think about data will change, and you’ll want to reimagine your end-to-end business processes so you have the ability to pivot quickly as you learn what is and isn’t working. 

Systems created for a product-centric business will struggle to support these new initiatives. You need a system that’s purpose built from the ground up for a subscription business. 

Considering the standard metrics that you might have for selling a car, like units sold, inventory margin, or cost of goods sold. With a new subscription-based model, you need to focus on subscriber-centric insights, such as churn and consumption or usage.

You’ve moved from measuring an average order value to a total customer lifetime value, which can be measured through metrics like annual recurring revenue or monthly recurring revenue. 

Related: The evolution of subscriptions for automotive companies 

Value of data

A major benefit of retaining customers is the ability to track customer data over time, which deepens your customer insights. These insights enable you to truly understand how customers buy and what they need to make a purchase. 

Access to the right data also allows you to experiment with the variety of experiences and services you offer to customers so you can continue to improve and evolve over time. 

Through effective data collection and personalization, businesses can deepen customer relationships, creating more trust and value, which can help you to outperform traditional retail models. 

Thriving in industry 4.0

Changing buyer behaviors and shifting business models as part of industry 4.0 has caused many industrial manufacturers to move away from older business models of adding more and more new products every year to instead selling product features and services. The focus is now on becoming a value added partner selling an outcome to your customers instead of a single, physical product. 

If your product is a type of heavy machinery, like an earth mover, for example, your competitor’s product might have a few differences from yours, but essentially your equipment can accomplish the same job or task, which is moving that dirt or debris. 

A way to differentiate yourself and your product is to change the business model. Creative new models for monetizing industrial products are emerging, empowered by data, such as proactive service, monitoring, remote repair, parts replenishment, and usage based services. 

Digitally mature businesses often can use their existing technology investments to scale subscriptions and offerings. 

Here are a few examples of how you could start expanding your offerings through subscriptions. 

One place to start is with your data. You may have IoT or telematics in your physical products that enable you to monitor that specific machine or piece of equipment. This data can show you important information about how the machine is running, how often, specific settings, the heat level, etc. 

That data can be collected and transmitted back to your customers, and you might charge a fee for the ability to monitor the machine in addition to selling the machine itself. This benefits your customers by allowing them to monitor devices at satellite locations from their central headquarters and respond if needed. 

The next stage of monetization could be to sell based on consumption, such as hours using a product or machine. This could be a cost savings for customers if they can define their usage needs up front, instead of purchasing the machine outright. This also gives customers the flexibility to use only what they need. 

From here, you might offer proactive service and monitoring. This goes a step beyond the monitoring discussed previously by taking that same data on each machine or device and using AI models to predict when that machine will need to be serviced. With that information you can issue proactive service tickets for technicians before a breakdown or issue. 

You can combine this type of service with a parts subscription. Again using the data from the machine to determine when it will need certain parts changed and delivering them on a regular cadence. This benefits the customer because they don’t need to keep parts in their own inventory and can better manage operating expenses.  

It’s possible to start small based on the investments and technology your business already has and scale up as you learn what your customers want and need. 

Support for your recurring revenue model

Adobe Commerce, Zuora, and IBM offer an integrated solution for e-commerce, subscription billing, and digital experience management to help businesses optimize operations, increase revenue, and provide superior customer experiences. 

Learn more about the Zuora Connector for Adobe Commerce on the Adobe Marketplace.