How to Evolve and Adapt with B2B Subscription Models

Blog: Solutions Review - Business Process Management

B2B Subscription Models

Lincoln Lincoln—the Vice President & Head of Global Sales & Customer Success at CloudBlue—offers commentary on how companies are evolving and adapting to B2B subscription models. This article originally appeared in Insight Jam, an enterprise IT community that enables human conversation on AI.

Just over a decade ago, the idea of having a subscription for your exercise bike would have been out of the ordinary. Today, there are subscriptions for just about anything, from streaming services for your favorite music to software tools. The buying experience has evolved from a one-time transaction to a dynamic exchange with subscriptions that allow products and services to grow with you. In the case of an exercise bike, for instance, a subscription provides an immersive experience that you can upgrade, downgrade, or cancel as needed.

Most consumers, on average, spend up to $499 a year on subscriptions. In the B2B space, subscriptions have also made the customer journey more dynamic and complex. Along with the sheer volume of applications that can be delivered through subscription, the sophistication of those applications has evolved. Understanding how to navigate subscription management with different pricing models helps you respond to customer usage patterns and stay competitive.

Here are three key points to consider when managing your subscription business:

1) The Catalog

A common mistake is to think that having a supermarket-type digital marketplace with hundreds of the most popular items is the right way to go. This could not be further from the truth. Instead, think precision rather than abundance because it is crucial to map out your key audience to target in the marketplace. Begin with a curated selection of products or services, ensuring that those responsible for sales—partners, sales teams, or marketers—are equipped to showcase and effectively promote what’s on offer.

2) Go-to-Market Strategy

It is not enough to open a marketplace, fill it with “stuff,” and wait for customers to find you. That is a recipe for a stagnant marketplace because technology alone will not generate business. Stakeholders need to devise a business plan that identifies which channels to use—whether online, direct, or indirect—to effectively reach their target audience.

Your subscription business plan models should outline clear benchmarks and projections. This includes determining the number of subscriptions to sell in the initial years and forecasting when the business will break even and achieve profitability. You should build your platform around your go-to-market strategy to maximize return on investment (ROI).

3) Cutting-edge Technology

You need technology to support the first two points. Be sure to work with flexible and scalable infrastructure that efficiently handles varying activity levels and customer needs. You can automate backend processes to streamline your subscription model’s ordering, provisioning, and billing.

Subscription Model Challenges

Analysts expect steady growth of the subscription business model. The global market is expected to reach a value of $1.5 trillion in 2025, marking a significant increase from its $650 billion valuation in 2020.

As your subscription business grows, processes become more complex because of the volume of transactions, customer inquiries, and back-office tasks. Dealing with various service-level agreements (SLAs) and pricing tiers adds to the challenge. It is also crucial to stay on top of the level of service for each subscriber according to their chosen plan while also managing upgrades, downgrades, and cancellations.

Working with a cloud monetization platform provides a procurement engine that integrates with your contracts, simplifying purchases from independent software vendors (ISVs) and distributors. With automated provisioning and invoicing, you can streamline SKU updates, price adjustments, and subscription renewals. You can also get updates in real-time and access comprehensive analytics and reporting to help you make data-driven decisions.

Cloud monetization platforms empower you to onboard products quickly, reducing the time to market. This type of agility allows you to experiment in an environment where you can fail fast and learn quickly, fostering innovation as you adapt to changing consumer preferences and market dynamics.

Artificial Intelligence in the Mix

Information is power when growing your subscription business, and artificial intelligence (AI) offers one of the biggest opportunities to handle massive amounts of data. By aggregating this data into a centralized repository or data lake, you can gain valuable insights into consumer behavior, preferences, and trends.

You can use AI to analyze patterns to see who buys what and in what location. You get insights into customer behavior, demographics, and industry trends to help you deliver personalized product or service recommendations to customers. AI-driven predictive analytics can help businesses forecast demand, identify potential churn risks, and proactively address customer concerns before they escalate.

Enhancing the Customer Experience

With a subscription business, you can become a trusted partner for your customers as you build a relationship over time. Nowadays, companies across industries offer additional services, such as a subscription to Microsoft 365, along with their core products. A business can become “stickier” as a supplier and more integral to its customers by providing a comprehensive suite of services beyond core offerings. Loyal customers are five times more likely to be repeat customers and four times as inclined to recommend the company to a friend.

Just over a decade ago, businesses navigated a marketplace dominated by a handful of products. Today, there are many specialized applications tailored for B2B consumption. This evolution presents both challenges and opportunities. The proliferation of products and the complexity of subscription models demand innovative approaches to enhance the customer experience. Streamlining subscription processes is paramount in achieving this goal.

A cloud monetization platform is a great enabler for increasing your average revenue per unit (ARPU) because it provides technological tools that help you offer customized offerings and nurture ongoing customer interactions. Working with a platform is essential for navigating subscription management and streamlining operations in the increasingly competitive B2B subscription landscape.