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Mind the Gap: Avoiding Revenue Pitfalls in the Subscription Economy

In the book “Consumption Economics,” the authors describe a phenomenon called the “consumption gap” which is essentially the difference between a product’s capability and what a customer actually uses. The authors point out that this consumption gap will be a catalyst for technology business failures in the Subscription Economy. But how does a company know if they have a consumption gap? How do they quantify it? And how do they avoid revenue churn because of the gap? Step 1: Measure the Gap To evaluate if you have a consumption gap, you need to measure and quantify it. That means you need to take inventory on your product’s capabilities and how much a particular customer uses them. For offering, the most [...]

Why Data Trumps Experience in Trial Conversions

Probably one of the biggest mistakes publishers can make on converting trials is relying on experience and intuition. The art of implementing and managing trials doesn’t match the science of new data-driven techniques. Using predictive analytics to qualify trial users and focus on those that are most likely to convert can double conversion rates. In a 2012 study, the Aberdeen Group published a finding that companies using predictive analytics have a 73% sales lift versus companies that did not. In a previous note on trials, loyalty was described as a good measure for predicting conversions. This post expands on the loyalty measure to demonstrate how to implement trials scoring that increases conversions. Trial users can be measured and scored any [...]

Managing Yield Across Your License Structure

This is the third research alert in a series on pricing. One alert examined why metering access maximizes revenue. The other examined ways in which metering could be effectively applied through tiering at the user level. This research alert examines how to benchmark and manage yield across your license structure, and specifically with site licenses that blend users and discounting. Site licenses give customers unlimited use of a service while paying a flat, discounted price. The customer motivation to buy site licenses is that it makes purchasing decisions easier than trying to determine which users need which licenses. Another customer motivation for site licenses is that it makes on-going administration easier than trying to manage users and license allocations. For [...]

Why Metered Pricing Models Maximize Revenue

Maximizing revenue from digital subscriptions is dependent on monetizing usage rather than the users themselves. Comparing print subscriptions to digital subscriptions highlights why usage behavior is the basis of revenue, and applying the principles of yield management shows why metered pricing models produce the most revenue. Why Usage? Comparing Print vs. Digital Subscriptions Based on the fact that print is a physically distributed product and digital is an on-demand service, print subscriptions differ from digital subscriptions in three critical ways: Fixed vs. Variable Content Delivery. The print product has a fixed definition of content delivery which is received by every customer that purchases a subscription. A digital service has a variable definition of content delivery because usage varies across customers. [...]