No matter the industry or company size, moving to a recurring business model can be an enormous undertaking. Not only do customer relationships need to be reconsidered to support a recurring mindset, but lead-to-cash systems must be adaptable and able to accommodate contract renewals and amendments.
But the effort comes with tremendous benefits — companies with recurring business models are ahead of the curve because they know that to effectively capitalize on market opportunities, they must be agile, flexible and scalable. The ability to rapidly and accurately construct, design, and produce new offers and pricing plans is a key differentiator and the secret to successful digital monetization.
What is Digital Monetization?
Digital monetization is a business practice, not a single process or action, and is the core of subscription-based models like Everything-as-a-Service and Anything-as-a-Service (XaaS). Subscription-based business models have grown nearly 200% annually since 2011, but for those who have yet to make the shift, it’s not too late.
Digital Monetization Strategies
Digital monetization strategies start with identifying the organizational resources that the business seeks to monetize. Traditionally, these resources were limited to products and services but now the definition has expanded to include information or data, market access, experiences, and outcomes. Imagine purchasing the house of the future – the resource is not only the home, but also additional services such as financing, entertainment, home security and home maintenance.
There are many drivers of monetization but one of the biggest is customer satisfaction. Over 50% of businesses, according to MGI Research, see customer satisfaction as critical to their business. Another big driver is time-to-market. According to recent studies, more than 50% of businesses want the ability to introduce new offers in less than 4 weeks, but the reality is that this process often takes 6 months or more. An effective digital modernization strategy and implementation could be the thing that makes or breaks your business.
Other drivers of monetization include:
- Agility, flexibility and scalability
- Internal costs
- Revenue forecasting
Benefits of Monetization
Because monetization is a business practice that’s supported by a combination of technology, skills, and business workflow, there are many potentialbenefits, such as:
- Improved customer experience and retention
- Accelerated time-to-market
- Better agility, scalability and flexibility
- More predictable revenue streams
- Reduced revenue leakage
- Decreased operational costs
Technology and Monetization
The growth of cloud technology has significantly contributed to the growth of monetization and subscription-based models. DevOps and cloud automation can greatly accelerate time-to-market while improving business efficiencies and lowering operational costs.
A lead-to-cash or Configure Price Quote (CPQ) solution can help improve digital experiences with self-service capabilities, rich user interfaces and guided selling. An effective CPQ solution can integrate with your CRM and other processes for a seamless customer experience.
Monetization and Your Business
But how can you know if your business will benefit from a more robust digital monetization strategy and implementation? MGI Research has identified the 15 key symptoms of companies who struggle with the challenges of rapidly evolving monetization:
- Pricing model changes require re-coding of the billing system
- Companies not able to launch new offers in less than six months
- Existing finance and billing systems being stretched beyond their capabilities
- Revenue leakage (not so fun fact: all businesses have 2-5% of total revenues lost due to operational holes)
- Wrong products and/or configurations being sold or shipped to customers
- Perennial Invoice Disputes with Customers – High percentage of re-bills
- Sales productivity consumed by customer billing issues
- Heavy use of Excel for billing, revenue recognition, CPQ, provisioning, etc.
- No Single Source of Truth (SSOT)
- SKU sprawl – same items sold in different currencies, with different payment schedules, etc.
- Customer friction due to lack of invoice transparency and clarity
- Many “One-Off” deals
- Lengthy financial closings
- No tracking of contract terms and conditions
- No single product catalog or a single master price list
If you’re seeing any of these signals arise within your company, then it’s time to take action.