The Rise of B2B Subscriptions

Discover why the subscription model speaks directly to B2B customer expectations in the current climate and how to shift your focus from finding new customers to retaining existing ones. 

Anything as-a-service: how customer expectations have shifted

It’s safe to say that the recurring revenue model is thriving in 2022. 

Commentators have dubbed the post-pandemic marketplace the ‘Subscription Society’. UBS Wealth predict the ‘subscription economy’ will be worth $1.5 trillion by 2025. That’s around 18% annualised growth from the 2020 estimated worth of $650 million.

From Amazon Prime video streaming to Dollar Shave Club razor blades, Online shoppers are now well-used to the ‘subscription commerce experience’, accessing precisely what they need when they need it – and for as long as they need it – in exchange for a simple recurring fee. 

It’s a similar story in B2B. Increasingly, we see products once available as a one-time purchase become subscription-based services that you pay to access, reducing the cost barrier such as, Software as a Service (SaaS), Equipment as a Service, Infrastructure as a Service and Maintenance as a Service. 

The benefits to businesses from ownership to B2B subscription-based business model include:

  • Reduced risk on technology
  • Lower maintenance costs
  • Predictability of costs
  • Revenue rather than capital spend; and a saving of resources such as space, technical staff, and data centres.

These benefits highlight why the continuous subscription model is becoming increasingly popular. 

B2B subscriptions: shifting from acquisition to retention

As a result, many B2B companies are overhauling how they roll out their goods and services. Replacing expensive one-time purchases with a monthly fee or annual/ long-term subscription. 

When companies make this shift, the focus from monitoring customer acquisition costs to managing customer retention is critical.

The customer lifetime value (CLV) becomes the most important metric. The CLV represents how well you’re serving clients, how valuable your product or service is to them, and how well you’re delivering your solution with the appropriate customer experience. 

Undoubtedly, maintaining each and every recurring relationship is an absolute business priority.

Here are 3 goals to help you shift your focus from customer acquisition to customer retention.

  • Boost customer retention by lowering the barriers to purchase and offering greater flexibility on budget and contract terms. 
  • Create a seamless, self-serve customer experience that frees valuable time and resources.
  • Increase revenue and brand loyalty through personalisation. Identify the upselling opportunities across the subscription lifecycle.

For a business to succeed, it has to adapt to changing environments and the buyer’s expectations.

Eliminating leakage

In the current climate, any opportunity to reduce operating costs and potentially pass on savings to the customer – will be highly welcome.

Subscription management introduces greater standardisation and automation to purchasing and billing processes. In particular, this means less waste through inaccurate billing, lower revenue leakage caused by inconsistent application of rating rules and the elimination of delays in invoice distribution. For finance, the right solution can help free up time and resources, thanks to automated transaction recording and reconciliation.

Remember that an increasing proportion of your business customers will seek to scrutinise their supplier relationships through the lens of ESG (Environmental, Social & Governance) frameworks.

Therefore a subscription model can be presented as a way for your company to proactively assist customers in working towards their ESG goals.

Whereas on the transaction processing side, it eliminates the need for invoicing, chase-ups and error rectification, thereby saving time and resources.

On a fundamental level, it facilitates a much more flexible consumption-based purchasing model: i.e. it becomes more accessible than ever for customers to purchase what they need, precisely when they need it, on terms that work for them, with less waste and a lower energy footprint.

Read on to discover how Subscription Management Delivers Exceptional B2B Buying Experiences Every Time