By Simon Blunn, SVP & General Manager EMEA at Zuora

At our recent Subscribed Live London event, I had the pleasure of listening to insights from Zuora’s Amy Konary and ISG’s Stephen Hurrell provided insights into the evolving landscape of subscription-based models and the concept of Dynamic Monetization.

This strategy, which involves expanding beyond traditional subscriptions to explore a diverse mix of models, is becoming increasingly vital for businesses aiming to align their monetization strategies with customer demand and drive sustainable, recurring growth.

In this blog, I’ll recap some of the key points discussed throughout the event, including how subscription models are evolving and the challenges associated with these changes.

The Shift Towards Customer-Centric Monetization

One of the most compelling insights from the event came from a comprehensive Zuora survey conducted across North America, the UK, France, and Japan, which revealed valuable insights into consumer preferences and generational differences in purchasing behaviors. The key takeaway? Consumers deeply value choice and sophistication in their purchasing options, with a strong preference for multiple monetization models.

Stephen Hurrell emphasized that this preference for flexibility isn’t just a passing trend. He noted, “This is not a fad. This is a fundamental shift in the way businesses impact themselves.”

I couldn’t agree more. In my role at Zuora, I’ve seen firsthand how companies are shifting.

Data from real companies also demonstrates that those offering more unique charging methods experience faster revenue growth, higher Average Revenue Per Account (ARPA), and lower churn rates.

Amy Konary highlighted the long-term trend of the subscription economy, explaining that this shift is not a recent development but a gradual and crucial change in how businesses have operated.

From Traditional Models to New Subscriptions

The shift from traditional one-time purchases to subscription-based models has significantly altered the risk profile for both businesses and consumers. Hurrell explains this change: “Consumers are embracing models where the risk profile shifts from the buyer having all the risk towards the sellers of services.” In practice, this means customers now pay for what they use rather than committing to a fixed monthly fee for potentially unused services. While this reduces risk for customers, it makes revenue prediction more challenging for businesses.

This transition offers several benefits to consumers, including no upfront commitments, and better alignment with their personal preferences. But despite appearing to favor customers, what excites me most is that businesses stand to gain as well. I’ve seen how improved alignment with user needs can lead to an increased likelihood of customer retention, which means long-term benefits for businesses such as upsells, and brand advocates.

This shift towards better service alignment and usage doesn’t just stop with billing alone. Additional survey data outlined in the discussion revealed that flexibility in general is highly important to consumers, with millennials placing a particularly high value on it. Hurrell noted, “People who grew up with Netflix, who grew up with digital services, see this as the new normal. This [flexibility] is now what they expect.”

Hurrell points out, “To not offer flexibility is actually a discredit for you as an organization.” In today’s digital environment, where consumers have more choices than ever, losing customers due to inflexible monetization models can be a costly mistake.

Challenges in a New Subscription World

While the benefits of Dynamic Monetization are clear, I’d be remiss not to address the challenges it presents, particularly in aligning internal processes with new subscription-based models. One critical area requiring adaptation is sales compensation plans. Hurrell shared an example of a tech company that introduced a self-service plan but faced unexpected challenges due to outdated sales compensation structures.

He explained, “The salespeople would only get comped if someone were to order from them. So even though there was a new self service system, the salesperson was intercepting the order, so it was processed under his or her name, because that’s how they got comp.” 

This scenario highlights a crucial insight: the shift towards Dynamic Monetization demands more than just surface-level changes. It requires a holistic transformation that touches every aspect of the business. As Hurrell aptly put it, “Successful companies change the whole way they recognize a customer, they focus on the importance of a customer throughout a lifetime.”

Konary and Hurrell went on to highlight other potential challenges in this new landscape, including:

• Adapting billing systems to handle diverse monetization models
• Retraining customer service teams to support a more complex product offering
• Adjusting financial forecasting methods to account for variable revenue streams
• Realigning marketing strategies to promote flexible purchasing options

Overcoming these challenges requires a strategic approach, cross-departmental collaboration, and a willingness to reimagine established business processes. 

Preparing for a Flexible Future

As the subscription economy continues to evolve, businesses must embrace a Dynamic Monetization strategy that goes beyond traditional subscription models. In my view, the key to success in this new landscape lies in understanding and anticipating customer demands, offering flexible, customer-centric monetization options, adapting internal processes and compensation structures, embracing technology that supports complex monetization strategies, and continuously evolving and refining monetization approaches based on data and customer feedback.

By taking a future-focused approach and laying the groundwork for sustainable recurring growth through customer-centric strategies and adaptable business models, companies can position themselves as winners in this evolving landscape. As both Konary and Hurrell emphasized, the businesses that will thrive are those that not only navigate the immediate challenges of the economic environment and increasing competition but also understand and anticipate the changing demands of their customers.

In the end, Dynamic Monetization is not just about offering new subscriptions – it’s about creating a flexible, customer-centric approach to value creation and capture that can adapt to the ever-changing needs of the market.