3. Mastering Your Subscription Pricing Game Plan 2
The Keys to Driving
Recurring Revenue Growth
Your company’s traditional approach may be blocking the true
revenue potential of customer relationships. Especially if you’ve
stuck with the same pricing scheme for years, even as your
competitors have improved their revenue models continuously.
But how do you make the shift from traditional product pricing
to a relationship-based subscription model? It takes strategy,
teamwork and field-tested plays.
Let’s get started.
4. Mastering Your Subscription Pricing Game Plan 3
This playbook will make you challenge the status quo, so get ready.
Get Ready for a Challenge
Thought-provoking questions will help you
crystallize thinking around product packages, how
they’re priced, and where your company fits into the
Subscription Economy. You’ll also encounter true
stories about companies disrupting their industries
and paving the road to success in recurring
relationships. What’s covered:
• The Game: an overview of the
Subscription Economy
• Players: types, and where your
company fits in the mix
• Rules: 4 basic pricing models that
govern your moves
• Scenarios: how customer relationships
affect the game
• Teamwork: getting key influencers
on board with change
• Moves: how to start game play and
what to expect
All this thinking and learning might make you thirsty.
So grab your favorite beverage, settle in, and read
front-to-back. When you’re through, you’ll think
differently about your current approach to pricing
and packaging. And you’ll be well on your way to
success in the Subscription Economy.
THE RULES, THEY’VE CHANGED.
From music streaming to car sharing, people are
demanding more flexible consumer relationships.
To meet this demand, businesses are rapidly
transitioning away from selling products to selling
services, and developing new business models built
on recurring relationships. As the market shifts to
this approach, massive growth opportunities will
develop for smart companies that know how to evolve.
And you don’t want to get left behind. Take the
time now to learn how to support your business
with pricing agility. It’s more than a smart move.
It’s your future.
5. Mastering Your Subscription Pricing Game Plan 4
Companies of all
sizes and across
all industries
have transformed
themselves to
take advantage
of the Subscription
Economy.
In a recent international survey conducted by the Economist Intelligence
Unit, four out of five companies reported seeing changes in how their
customers want to access goods and services. Over half are changing
or planning to change how offerings are priced and delivered. And the
introduction of subscription services is the biggest change, implemented
by 40% of the respondents.
It’s not only possible to increase the value of business and customer
relationships through new pricing models, it’s happening all around us.
Companies of every imaginable size and industry have transformed
themselves to take advantage of the Subscription Economy and grow
revenue based on the value of recurring relationships:
• Dollar Shave Club™, a subscription-based razor replacement service,
has disrupted Gillette and Schick.
• T-Mobile™ cut out their 2-year service agreement and forced other
carriers to follow suit.
• Netflix™ put Blockbuster™ out of the home entertainment business by
listening to customers and responding to their needs.
• Amazon™ Web Services created the usage-based cloud model and
revolutionized cloud computing and storage.
The Recurring Revenue
Shift is Real
COMPANIES ARE
SEEING THE SHIFT
Look around, and you’ll see it.
ARE CHANGING
HOW OFFERINGS
ARE PRICED
IMPLEMENTATION
OF SUBSCRIPTION
THE GAME
6. Mastering Your Subscription Pricing Game Plan 5
Pricing and
packaging should
be used as strategic
weapons, not
afterthoughts.
It’s time to get familiar with the two primary pricing mindsets:
product and subscription.
In the product world, production expenses and desired profit margins
determine price. To be their most effective, pricing and packaging should
be used as strategic weapons, not afterthoughts. In the subscription world,
prices and packages shift to fit customers, unlocking new ways to build
long-term revenue relationships.
Two Strategically Different Worlds.
Product vs. Subscription Pricing
PRODUCT WORLD SUBSCRIPTION WORLD
Cost-plus pricing strategy:
expense plus desired profit = price.
Customer value pricing strategy:
based on demand and usage.
Revenue grows as unit volume grows. Revenue grows as relationships grow.
Business and customer interaction disappears
after purchase.
Business and customer have an ongoing
relationship and dialogue.
Product/service level is predetermined.
Product/service level is responsive to
customer needs.
Price and package adjustments are
operationally difficult.
Service amendments like add-ons and upsells are
built into operations.
Customers don’t have ongoing input into go-to-
market strategy.
Intelligence from customer relationships, such as
usage, informs go-to-market strategy.
Product cost and quality are the basis for competition. Pricing and packaging are the basis for competition.
THE GAME
7. Mastering Your Subscription Pricing Game Plan 6
What kind of player are you?
There’s a spectrum for pricing, from rigid to agile. Answer the
question below to find out where you fit in, and then get a
prescription for a flexible but market-savvy approach that allows
for huge potential.
WHAT’S THE BEST WAY TO DESCRIBE YOUR PRICING
APPROACH? (PICK ONE.)
A. You pick a price and the business sticks with it, to avoid confusion.
B. Your salespeople adjust prices to accommodate their customers.
C. Your price is based on market competitors and incumbents.
D. You set a new bar for price, not really looking at what others
are doing.
E. You change packages and prices often, like the weather.
Pricing Psychology
Pop Quiz
A B
C D
E
PLAYERS
8. Mastering Your Subscription Pricing Game Plan 7
A = SET IT AND FORGET IT
A popular approach with traditional companies,
this model seems relatively easy to implement. But
in reality, it’s the most time-consuming and costly
structure to set up. Plus, it’s the most difficult to
test. And you can’t really ever forget about pricing.
If your prices don’t respond to market influences,
you’ll miss opportunities for revenue and growth.
Rx: Dust off the cobwebs. Get ideas from industry disruptors,
customers, prospects, notable successes and notable
flame-outs. Then test—it doesn’t have to be all or nothing.
B = LET’S MAKE A DEAL
This is a trap that companies selling to large
enterprises often fall into, because big deals require
lots of customization. Your sales team sets the
prices for each customer, so every deal is different
and you don’t have standard pricing. This makes it
tough to establish what works. And impossible to
project future revenue.
Rx: Start to look for patterns. Identify segments of
customers with certain buying preferences; establish
pricing tiers, then test and track.
C = PLAYING DEFENSE
Your ultimate goal is to price yourself lower than
the competition, and you put lots of energy towards
competitive intelligence around pricing. This means
you also cede the market to your buyers, who
simply hold out for the best number. This happens
Your Pricing Profile
all the time in parity products like fuel and airlines.
But it doesn’t have to keep happening.
Rx: Create true differentiation for your products. Research
to find out what buyers are willing to buck up for, and
explore ways to add value through packaging innovation.
D = PLAYING OFFENSE
You know how competitors are pricing, but that’s
not how you play. Instead, you look at customer
value drivers and clear points of differentiation,
then significantly raise or lower the price and the
value you offer. This is bold, but you may be missing
the point if you’re not taking market context into
consideration.
Rx: Get more feedback and get more sophisticated in
approach. Fine-tune innovations and offerings to better
match customer preferences and behavior patterns.
E = THE DISRUPTER
You’re unafraid to change your price frequently,
optimize your bundles and packages, exclude
certain customers, include others, and then do it
all over again. It’s likely you’re in the mobile carrier
business. And it’s a definite that you understand
how critical it is for your invoices to be clear, simple
and transparent customer communications.
Rx: Don’t get comfortable, ever. Continue to analyze
data, get feedback and test to create the best scenarios
for your customers and your business.
PLAYERS
9. Mastering Your Subscription Pricing Game Plan 8
#1 ONE-TIME PRICE MODEL
This is the traditional pricing model. Netflix started
this way, with a one-disc-per-person plan. It’s
simple: you sell one product for a one-time price
to one customer at a time. While technically not a
subscription, this model still might be needed by a
subscription-based business for a set-up fee or the
purchase of equipment that the subscription requires.
#2 FIXED, RECURRING MODEL
This model is a smart bet if you’re just starting out in
subscriptions—it’s what services like Amazon Prime
use. You provide a single product for a single price,
and charge on a recurring basis. When you’re ready,
you can add more products. It’ll still be simple to
manage because every product has a distinct price.
Really, they’re all you need to know.
The 4 Basic Pricing Models1
#3 PER UNIT/PER USER MODEL
In this more advanced pricing model, what you
charge the customer is based on one of two things:
the number of units consumed or the number of
users with access. For the number of units used,
gigabytes of data are a good example. For the
number of users, think about how Salesforce sells
seats today.
#4 USAGE MODEL
The most complex of the subscription models, this
type of pricing is used primarily by IT and Cloud
Services companies like Amazon Web Services.
The beauty here is that you can enable customers
to pay only for what they use, which makes them
happier and less likely to churn. It’s instantly
responsive, so when customer usage changes,
the price reflects it.
Now that you know your pricing psychology profile, let’s establish the rules of the playing field.
Whether you’re new or an expert, it helps to have a sense of the rules of the game. That’s what
these four basic pricing models are—know them, and you know the basic rules of play for any
pricing strategy, from a traditional product model to an agile, subscription-based approach.
#1
#2
#3
#4
RULES
10. Mastering Your Subscription Pricing Game Plan 9
• You want to increase adoption of your new
service and want to test a freemium or free
trial strategy.
• You introduce new services that you want to
aggressively cross-sell to existing customers.
• You want to increase the length of subscription
commitment, say from monthly to annual.
• You’re expanding to international markets
and want to ensure you correctly price in
local currency.
Now let’s test your knowledge.
Not sure if everything really sunk in? Formulate a response for each of the real-world pricing
scenarios here, based on what you’ve just read. Pick a colleague and talk through the scenarios.
This exercise will help set your new knowledge into memory. Are some of these pricing concepts
unfamiliar? Read on as we’ll cover them in more depth.
• You start getting significant interest in a new
vertical market, but they want only half of your
features, and don’t want to pay full price for them.
• Your competitor lowers their price below yours
for a comparable service.
• Your competitor launches a free service with
many of your paid features.
RULES
The 4 Basic Pricing Models
11. Mastering Your Subscription Pricing Game Plan 10
Recurring Revenue
Relationships
At the core of any successful subscription business, you’ll find
real desire to create mutually beneficial relationships with a large
number of diverse customers.
This means you can’t force customers’ needs to conveniently fit a single
mold. Instead, you have to prove you understand they’re individuals, and
build relationships in a way that addresses their unique buyer personas. It’s
about managing the relationship lifecycle, not the number of products sold,
or revenue from one-time transactions. In today’s Subscription Economy,
you become a major player by nurturing long-term relationships.
It’s not a numbers game. It’s about customers.
THEN
I’m special! Take
care of me.
Customer service
should explain
everything to me,
at every step.
I don’t know your
business. Suggest
the best service and
price option.
No problem, I’ll wait
a little for my
service upgrades to
get “processed.”
Tell me when it’s time to
make a change to my
account and help me do it.
NOW
I’m busy!
Empower me.
Service upgrades
should happen in
real time. Waiting is
for suckers.
I know myself better
than anyone. Give me
service and price
choices for my needs.
Customer service
should stay out of
my hair. Unless I
reach out for help.
Give me the freedom
to make account
changes on my own.
SCENARIOS
12. Mastering Your Subscription Pricing Game Plan 11
Create personal connections with your customers to realize the
full potential of the subscription model. Instead of understanding
and meeting customer expectations, blow them away. Ruthlessly
test to make sure what you offer works every time. Support it with
exceptional customer service. And build ridiculously fast, easy
payment and upgrade processes.
Once you’ve taken care of these essentials, you’re on the road to optimal
revenue through customer connections. But there’s still a ways to go if you
want to reach the soul-mate level of customer relationships. For that, you’ll
want to pay close attention to differing patterns in usage, and respond
to key moments for each user type. Use information about each user’s
behavior to anticipate what they’ll need. For example: when you see that a
user has “maxed out” their current plan, or gotten close for several billing
periods in a row, make an upgrade offer. This feels personal to customers,
as you’re looking out for their interest and in tune with their needs. It’s the
path to long-term commitment, and becoming a trusted advisor.
Leverage your options intelligently, doling out special offers, targeted add-
ons, automatic upgrades, special incentives and member discounts. And
always remember: Your customers aren’t all the same. So neither are your
customer relationships.
Customers think differently. Treat them differently.
Recurring Revenue
Relationships
Instead of understanding
and meeting customer
expectations, blow
them away.
SCENARIOS
13. Mastering Your Subscription Pricing Game Plan 12
When it comes to revenue, pricing counts. But you have to take a flexible approach, using pricing
strategy as a tool to enhance customer relationships. Show customers you “get” them, and you’ll
get a lot in return. Plus, you’ll be in a perfect position to make adjustments for growth and provide
more visibility into performance, value and trends. To do this, you’ll want to implement the right
strategy in the appropriate stage of the relationship.
Match Strategy to Customer Stage
Price-to-Fit
Looking for Love—New customers are the
foundation for your sustainable subscription
business. Quickly grab them with freemiums
and free trial offers. These proven promotional
strategies are used frequently for a reason.
They work.
Ready to get Serious—Once those new customers
get to know your product or service, they’ll likely
want more. This is the time to sell increases in
usage. Or to sell add-ons through product bundling
or special offers.
Lifetime Commitment—Customers who have
overwhelmingly positive experiences with you
over time, become loyal and locked into the
value you offer. If you keep delivering, they’ll pay
you handsomely.
Looking for Signs—When customers doubt whether
or not your product or service is the right choice,
prove you really want them, with a better value. This
is cheaper than trying to win them back later. Plus
you’ll keep that stream of revenue flowing.
LOOKING FOR
LOVE
READY TO GET
SERIOUS
LIFETIME
COMMITMENT
LOOKING
FOR SIGNS
SCENARIOS
14. Mastering Your Subscription Pricing Game Plan 13
Bust out all your best moves.
PRICING
AGILITY
Price-to-FitTo win in the
Subscription
Economy,
it’s critical that
you have
pricing agility.
Gathering customer information without putting
it to work is a waste of time. And haphazard
price iterations are a losing proposition. But put
that information and iteration together, and you
have something major: the ability to rapidly gain
customer insight, and then to evolve pricing
strategy to match it.
Not convinced iterative, responsive, agile pricing
is better? Consider this: a static approach to
pricing just doesn’t respond to change. It keeps
companies from taking advantage of customer
insight to build recurring revenue. To win in the
Subscription Economy, it’s critical that you have
pricing agility. Learn it, know it, and be a champion
for it. Your organization will benefit.
SCENARIOS
15. Mastering Your Subscription Pricing Game Plan 14
Moving to a subscription-based model means
a cultural shift. When your culture is supportive,
the bottom line grows. And when everyone’s not
aligned, it shows.
Who Owns Pricing?
Team Play
Do you remember the days of slow pricing decisions and
rollout? If you’ve been at a large company with legacy
systems, you may recall it’s a taxing process. Companies
with one-time pricing typically won’t have the opportunity
to sell again to a customer for a while. And when price
changes take a long time to implement, you’d better get it
right. And that requires a lot of debate and often a decision
by consensus.
In the subscription world, you have the opportunity to
rapidly test and iterate. Which leaves open the door
for faster decision-making. Pricing is usually driven by
product management that’s closely aligned with marketing
and finance. Although it’s occasionally finance. Yet, it’s
still important to enlist the right players across your
organization. Read on and see how a team of pricing
influencers could either move you ahead or block smart
moves, and identify who might need an invitation to a lunch
brainstorm session. (For best results, you buy.)
Combined Product
Management/Marketing
Finance
Operations & IT
Stand-Alone Marketing
Sales
THE INFORMANT
THE SPINMASTER THE DETECTIVE
THE SOLDIER THE OPERATIVE
TEAMWORK
16. Mastering Your Subscription Pricing Game Plan 15
MOVING AHEAD BLOCKING MOVES
Shares marketing knowledge and knows
the value of products. Determines how to
package features.
Wants to charge for features that should be free,
optimizing a particular product instead of pricing
for the big picture.
Helps communicate value to sales and your
customers. Able to rally the entire company
behind a new strategy.
Misses downstream impact of pricing changes
to operations and IT. Leaves out key details in
customer communications.
Builds models and able to guide revenue
projections and costs. Understands the revenue
rules that must be followed.
Challenges change and testing new options. Has
a risk-averse mindset and difficulty with change.
Pays close attention to the market; shares
knowledge and can offer valuable input on ideas
for features and willingness to pay.
Focuses on their market segment, applying that
added perspective when evaluating price strategy
for the entire company.
Implements changes and ensures all systems
support them flawlessly.
Balks at pricing strategy proposals that present
new operational challenges.
Combined
Product
Management/
Marketing
Stand-Alone
Marketing
Finance
Sales
Operations
& IT
DEPARTMENT/ROLE
THE INFORMANT
Team Play
THE SPINMASTER
THE DETECTIVE
THE SOLDIER
THE OPERATIVE
TEAMWORK
17. Mastering Your Subscription Pricing Game Plan 16
It’s time to roll up your sleeves, put on your thinking cap, and get in
the game. And because you’ve got this playbook to help you master
the basics, it won’t feel like you’re just rolling the dice and hoping
for luck. Instead, you’ll have real understanding of what it takes
to create a solid strategy that will get you a win in the game of
subscription pricing.
Subscription Pricing: How the Game is Played.
Mastering the Basics
JUST START
Pick one product for
your first recurring price
model, and go with it.
EXPERIMENT
Once you’re up and running,
test promotions
to see what works.
FULL-SCALE CHANGE
Rollouts based on discovery,
plus carefully crafted customer
communications.
WINNER!
You’re a pricing force to be
reckoned with, expert at agility.
ADD COMPLEXITY
Evolve what you offer based on
customer behavior learning.
TEST, ITERATE, REPEAT
Try things, and set up teams and
metrics to capture results.
START
WIN!
EXPERIMENTEXPERIMENT
COMPLEXITY
FULL-SCALE
CHANGE
MOVES
18. Mastering Your Subscription Pricing Game Plan 17
It’s early in the subscription pricing game, and it’s the first time
you’ve played. Maybe you’ve got a small case of nerves. Don’t let
them get the best of you, and stall what’s going to be an amazing
process. You’re about to do something that will lead to better
customer relationships, more informed pricing strategy, and
reliable, recurring revenue.
YOUR FIRST STEP IS TO MAKE AN EDUCATED GUESS.
Change is inevitable as things develop, so use what you know and go with
it. Think about your options and start simply with your first fixed recurring
price model. Choose a single product or service, and then choose a price.
Look at what alternative solutions cost—not just direct competitors, but
also different ways to get the same value. Also talk with prospective buyers
and gauge their “willingness to pay.” Be sure to keep your core values and
customer relationships in mind, because you’ll want to complement your
established strengths, not undermine them.
Just Start: You can’t win if you don’t play.
WINNING MOVE: INFORMATICA
When Informatica was looking to launch the first pay-as-you-
go product for cloud data integration, they knew success
hinged on support for their specific business model. The
idea was to create an easy point of entry for customers:
30-day free trial, monthly subscription fees based on use,
no contracts, and a self-service level of control.
Today, customers can sign up for a free trial or pay
immediately for Informatica Cloud Express. Consumption
information is available at any time, and customers have 7
usage-based pricing tiers to choose from. Plus, Informatica
sales gets an alert to engage if a customer is close to
maximum usage for their current tier. Amazed? There’s
more: Informatica Cloud Express got to market in a blazing
60 days, thanks to Zuora’s Subscription Commerce solution.
Mastering the Basics
MOVES
19. Mastering Your Subscription Pricing Game Plan 18
Once your fixed recurring price model is up and running, take a moment to congratulate yourself
on being up for the challenge. Then, make sure you’ve had some time to observe how things are
playing out. Now you’re ready to experiment. We’re not talking about dramatic, win-it-all or lose-
your-shirt risks. And we don’t mean complex scenarios with multiple pricing levers and customer
action plans.
Experiment: You’re in, now play to win.
Mastering the Basics
Your best game plan is to make a single, simple
adjustment to pricing strategy. To do this, you’ll
try out two or more promotion options and see
which one your customer decides to buy. From
there, you can refine more nuances and get more
sophisticated. But first, start out with a basic test like
a free trial or freemium offer. If you decide on a free
trial, test different time periods. If you go for freemium,
look into different product or service levels.
After a little time, the most successful results will rise
to the top, and you can change your pricing and
promotions based on what you learn to acquire new
customers. (Who doesn’t want that?) Now you’ve got
the hang of it, and you can graduate from those two
basic tests to more advanced experimental moves
like editions, bundling and upselling, and long-term
commitment options.
MOVES
20. Mastering Your Subscription Pricing Game Plan 19
Free Trial vs. Freemium
Mastering the Basics
If your simple subscription price model makes you feel trapped,
never fear. These two hard-to-refuse offer types are great ways
to score more customers.
FREE TRIAL FREEMIUM
THE WHAT:
Free trial is the total product experience, for a
limited time.
Freemium is a simplified product version, offered at
no charge.
THE PROS:
Customers get to see exactly how great your product is,
and start becoming dependent on it.
The absolute lowest barrier of entry, this offer nets
customer sign-ups quickly and easily.
THE CONS:
If your product is used infrequently, or it’s a bad
experience, prospects will never graduate to
paying customers.
Customers might not understand what they’ll get
when they pay. And when they do pay, it better be a
dramatically improved experience.
THE BENEFIT:
This is a great tool for qualifying customers. Get it right,
and they’ll stop shopping and stick with you.
This can create high-level visibility and conversation:
social buzz, free advertising, and major volume.
THE RATE:
Free trial companies often have a conversion rate as
high as 11%, if you blend B2B and B2C numbers.
Most freemium companies have 1–10% conversion
rates, with the average sitting around 2–4%.
MOVES
21. Mastering Your Subscription Pricing Game Plan 20
It’s time to add some complexity to your pricing system. Of course, you’re
not adding complexity without a purpose. Make sure you choose options
that make sense for your customers, based on what you’ve learned about
their behavior. Also, don’t jump in all at once. Pick and choose the areas that
could be most lucrative, and really play around. You’ve got all kinds of cards
to play here.
Add Complexity: Playing the right cards.
WINNING MOVE: BOX
With millions of individual users Box is a major name in
secure online content management, file sharing, and web
collaboration. They have 100,000 business clients as well,
and are confident about the future. But there were
growing pains.
As consumer and market needs changed, Box’s original
infrastructure fell short. Pricing needed to respond quickly,
and their system didn’t have a way to manage upsells, add-
ons, and change orders for millions of users. They had to be
PCI compliant to process credit card transactions. Plus they
wanted to pursue enterprise applications.
Zuora’s flexible billing, commerce and finance platform
has unlocked success for Box. It’s given them the power to
experiment with pricing, as a way to target new enterprise
segments. And there’s no question they can handle every
upsell, add-on, or change order they get today.
PRODUCTUPGRADES
PromotionsAdd-on Features
Business-to-Business Contracts
Tiered ModelsUsage-Based FeesPre-PaymentPay-as-You-GoBilling Frequencies
Volume Pricing
Pricing in Multiple Currencies
Mastering the Basics
MOVES
22. Mastering Your Subscription Pricing Game Plan 21
Test, Iterate, Repeat. And then, do it again.
Mastering the Basics
Sure, it will be repetitive and redundant. But
here, time really is money. So be a stone-
cold, information-gathering fiend. Use every
opportunity to observe and learn. And make
sure you have powerful company players on
your side. It will make your next move more
strategic, possibly brilliant, and potentially a
closeout winner.
At this stage of the game, you’ll want to make sure
you have the ability to test pricing, get feedback,
and roll that learning into your overall strategy.
This ability will give you the opportunity to try
new models, see how your customers react, and
determine new pathways to growth and revenue.
Of course, you’ll be missing a valuable perspective
if you don’t get input from prospects who choose
not to buy. So be sure to build surveys or follow-ups
with them into your plan, too.
Choose your metrics for pricing tests carefully.
You want to get to the heart of what’s important
for your organization to succeed, while also
taking into consideration the surrounding culture.
Present results in a format that works with what’s
established, and think through all the following areas
to find your ideal formula for measuring what wins:
• Net increase in customer acquisition
• Delta of revenue vs. baseline pricing
• Monthly recurring revenue
• Total contract value
• Customer lifetime value
• Churn rates
• Most used customer options
Businesses that are successful with pricing have
regular meetings to discuss strategy, so think
about which players you want to have on board
with pricing iterations, and invite them to regular
sessions. Consider including agile thinkers from
some or all of these departments: marketing,
sales, product development and management,
engineering, operations, and finance. You’ll want
these people in the room for your brainstorming
and trouble-shooting sessions. Tap into their
perspectives on market and competitive responses,
opportunities to capture new value, how to manage
inflation, new product and feature launches,
expansion into new markets, and promotions.
Although it may be more effort to include these
players in your planning, you’ll benefit by having
them on your side as you gather learning, sell up
to the C-suite, and implement change.
To win at
subscription
pricing, you
need more than
luck. You need
knowledge.
MOVES
23. Mastering Your Subscription Pricing Game Plan 22
Full-Scale Change: This is when it gets real.
Mastering the Basics
At this stage, you take all the insightful, actionable customer information
collected during iteration and testing, and put it into action. Be sure not to
lose sight of the customers who’ve empowered you and helped you get
to this point. They’re individuals, (or groups of individuals, when you have
business customers) who will need to adjust to the changes you introduce.
So it’s critical that you communicate what you’re doing clearly, ahead of
time, and with an awareness of how it will impact people’s daily business
and life. Think through existing subscriber base management. And don’t
overlook adjustments you’ll need to make in operations, to support
your customers.
Thoughtful customer care may seem unnecessary when what you’re
offering is an improvement vetted by testing and the market. But don’t be
cavalier with your customer relationships. When customers are on your side,
they have incredible power to contribute to your success. And when they’re
not? Well, let’s just say Netflix learned what that’s like. The hard way.
WINNING MOVE: OKTA
Today, Okta is a market leader in identity as a service (IDaaS)
with household-name clients such as LinkedIn and Sega.
A single Okta subscription often represents more than one
million users. This volume and complexity is impressive, but
wouldn’t have been possible with their original pricing and
accounting system.
Okta first went to market with a “standard” structure: non-
recurring fees for professional services, and per user
subscriptions. But as their customer base and vision
for the future grew, it became clear this wasn’t enough.
Okta needed to experiment with term lengths and billing
frequency to optimize revenue. Plus, pricing professional
services separately hindered Okta’s ability to contribute to
customer success.
Zuora’s responsive platform helped Okta meet their
challenges head-on: it enabled testing, so that they could
identify optimal billing structures that bundled professional
services with subscriptions, offering a better value and
experience than ever before.
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24. Mastering Your Subscription Pricing Game Plan 23
The best way to win at this game is going to be a path you choose, based
on what you offer, the culture of your organization, the current state of your
customer relationships, and the market. Don’t get discouraged if this sounds
like a lot to manage. You don’t have to take on everything all at once.
Shifting to the Subscription Economy is all about taking small steps over
time, and not being afraid to try something new. Remember, it’s never
a failure if you’ve learned something.
You’ve reached the end of this playbook, but it’s
just the beginning of your rise to success in agile
pricing. Just as no two customers are the same,
neither are any two businesses.
Not the end
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25. Mastering Your Subscription Pricing Game Plan 24
Also good to know
We’re Zuora, the global leader in Relationship Business
Management solutions, helping companies in every industry
transition to the Subscription Economy. Enterprise leaders and
high-growth companies alike use Zuora’s multi-tenant cloud
platform to launch, scale, and monetize their subscription services.
Our experts have uncovered 9 keys that are foundational
to the success of running a subscription-based business. Of
these 9 keys, pricing and packaging are the first, and a critical
consideration. This playbook was created to help you support
your business with transformative pricing and packaging, and find
your own success in the Subscription Economy.
