The conveyor belt changed assembly lines forever. We all remember the “I Love Lucy” episode that mythologized the “factory.” With a one-size-fits-all approach, factory workers could easily focus on their part of the production, no matter the product. This uniform approach is vital for many parts of the supply chain—especially factory work, but what has become increasingly apparent over the past decade is that companies’ needs, just like their customers’ needs, are not all the same.
Successful businesses have found a variety of ways to adjust existing workflows that enables them to streamline operations and become more efficient. In addition to finding new ways to make older systems work for them, these unique needs have also evolved into new ways to conduct business. Enter subscription and service-based models.
Succeeding in business has always required a company to find the best way to provide a solution that their customer needs, usually for the lowest cost. In the global economy that we live in, being able to meet a customer’s needs in the most effective and cost-friendly way, is tantamount to stand out. Subscription-based pricing has become a favorable option for many customers because it lowers barriers to access expensive products and the cost of ongoing maintenance.
Being able to increase market share with subscription and service-based models is a huge win for businesses, and also lays the foundation for a more satisfied customer. Long-term relationships are formed with these new customers rather than the traditional, one-time purchase, where chasing new clients was the primary way to grow. A satisfied lifetime customer provides a company exponential value rather than potentially losing them to cheaper options in the future.
Pay-as-you-go models widen the customer base and also create new revenue by allowing them to bundle products and services. Organizations are now able to customize products and services to provide more value with precise ways to meet their customers’ specific needs. Finding ways to do what they do best will always boost customer experiences and satisfaction.
We all know the major elements that compose supply chains: procurement, operations, distribution, and integration. Traditional models have required profitable businesses to do most (if not all) parts of the process themselves—or be forced to navigate complex contracts to partner with symbiotic companies. But what if there was a way to cut back on the focuses and drill down on the distinct part of the chain that you do best? This is another way that subscription-based models are elevating business.
Companies, like our customer, an industry-leading media technology provider, are moving away from the manufacturing and distribution side and moving to the service provider side. Instead of focusing on returns and logistics, a side of the business that can be done cheaply by someone else—they spend their time on consulting, marketing and selling. Pinning down the revenue streams that yield the highest results allows company flexibility that hasn’t previously been available. Reducing fixed and intangible assets on balance sheets turns into higher returns.
Better entry-level pricing encourages customer accounts to grow and mature over time, being able to specify which products and services they need. Rather than simply transferring ownership upon purchase, a subscription-based model grants them access to products and services for an explicit amount of time—which in turn, allows them to try new products and services more readily. New opportunities and cross-selling are just a few of the ways that teams can see an increase in revenue.
Regardless of the interval at which customers are charged, revenues are normalized to a monthly value which as you know is helpful for forecasting and labor requirements. While the benefits of this new model of business cannot be overstated, the difficulties that arise for implementation can be complicated.
Being ahead of the curve
Account management and billing have always been at the core of a profitable business model, and with service-based models, this has never been truer. Managing a long-term relationship with a customer provides greater revenue, but subscription-based contracts also require proper oversight to ensure that orders are fulfilled and billed correctly, profit is correctly organized, and customers are satisfied.
For many companies, this can be an unwieldy, manual process, especially for those that sell both products and services as they have to deal with service agreements as well as billing and revenue recognition But as with almost every aspect of the world, technology and automation are beginning to make the process more manageable. A subscription management platform (or system), like Oracle, helps a business streamline financial and operational management by connecting, tracking, and managing all of the moving parts.
Connection, collaboration, and accessibility are not new concepts. They’ve been vital to new and long-lasting businesses. The move to a subscription-based service model is the newest way we’re implementing these priorities in the supply chain cycle. Data management from customers, sellers, account managers and beyond, requires appropriate maintenance for successful service model implementation. Subscription management systems address obstacles by ensuring CRM data from across applications is seamlessly updated and shared with the ERP. With the right consultants and management platforms on hand, your business will be ready for whatever comes next.