HOW to SPEED UP

REVENUE with
SUBSCRIPTION
and USAGE
MODELS
A Guide for Revenue and Sales Operations
Foreword: Become a revenue revolutionary

In 2020, the value of cloud software companies shot up
more than four times higher than other company types.
“Software as a service” is outperforming software as a
one-time product. And it’s not just software as a service
— it’s engines as a service, elevators as a service, tires as
a service.
Kylie Fuentes “As a service” companies are worth more because
Vice President, investors are willing to pay for predictable, high-growth
Product at Salesforce revenue streams. So subscription and usage models are
your new paths to revenue. They come with:
• Economic agility to focus on maximizing profit
and cash flow to sustain businesses until
equilibrium returns — something that may take
several years.
If you’re ready to explore subscriptions and usage, but
don’t know where to start, then this guide is for you.
We’ll share insights we’ve learned and actions you can
take, and when you’re ready to reach out, Salesforce will
be here to help.

• Sales agility to go digital and enter new channels.

• Pricing agility with an infrastructure that delivers

the right pricing in real time, together
with automated monitoring and deep and reliable
datasets.

1 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com
Contents

CHAPTER 1
Why Recurring Revenue Models Work....................................................................... 3

CHAPTER 2
Getting Started with Recurring Revenue Models.................................................4

CHAPTER 3
Building a Strong Subscription Strategy................................................................. 6

CHAPTER 4
How Revenue Cloud Can Help.................................................................................... 9

YOUR NEXT STEPS........................................................................................................... 13

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C H A PT E R 1

Why Recurring Revenue

Models Work
As companies innovate on revenue models, they’re moving away from charging for
2. A lower barrier to entry, driving adoption and increasing
products, and toward charging for access to products. Then, revenue keeps coming
the customer base.
in over time — and grows exponentially as the customer base grows.
Customers get immediate access to your product and pay
Recurring Revenue Model (or “Subscription Model”) less at the beginning. It also becomes easier to run proofs of
Customers pay regularly for ongoing access to a product. concept.

TYPE
P U R E S U BS C R I PT IO N
Revenue is fixed. The amount that gets paid,
and when it gets paid, is predetermined.
EXAMPLE
3. Deeper customer relationships — and insights.
Long-term customer relationships become long-term datasets,
Subscribe to a enriching your customer understanding.
streaming service.

The shift to subscription is fundamental and

P U R E U S AG E ( O R “CO N S U M PT IO N ” )
Revenue is variable. The amount that gets paid, Order a rideshare. transformative.
and when it gets paid, is determined by use. Subscriptions add a dimension to revenue. It goes from a point to a line,
as shown in the chart.
HYBRID Pay an overage charge
Subscription and usage are blended. Revenue with your monthly
has both fixed and variable elements. phone bill. T R A N S ACT IO N M O D E L S U BS C R I PT IO N M O D E L
Every transaction is a new sale. After the new sale, transactions
continue — typically as
With all this potential for speeding up revenue, it’s no wonder that 80% of amendments and renewals —
businesses are adding subscriptions. The shift comes with big benefits: until they’re cancelled.

1. H
 igher margins over the lifetime of a product.
$ $ $ $ $
Subscriptions take customers away from your competitors for a longer
period of time.

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C H A PT E R 2

Getting Started with Recurring

Revenue Models
The subscription model isn’t new. In fact, book and periodical publishers
invented subscriptions in the 17th century. What’s new is that today,
subscriptions are available for more products than ever, from dog food to
streaming media.
• Simplify your product portfolio with retention and growth in
mind. Is your new monetization approach actually making you more
money? Or is it actually eroding value?

In the last decade, the subscription model took root in ecommerce and
doubled every year for 5 years. And now the subscription model is taking root
in B2B as well.

Behind the subscription, there’s a belief — that how you sell is as important as
what you sell. In this section, we’ll look at the how.

Where do I begin?
Companies sometimes launch complicated subscription models — and
particularly usage models — without having a good basis to do it. They skip the
most important first step: understanding what their customers actually want
and value.

So, start with your customers. Then choose your revenue model.

• Research how your customers want to buy. Are you

offering usage pricing when they’d prefer unlimited access?

• Discover how much your customers are willing to pay. Are you
launching new products without understanding the uptake potential
of the market?

4 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com
How do I choose?
The graphic below shows the spectrum of subscription models — with
pure subscriptions on one end, pure usage on the other end, and hybrid
possibilities in between.
The spectrum of subscription revenue models
One customer’s journey to the hybrid approach
One of our customers is a tractor manufacturer. For many years they sold
tractors to regional distributors who serviced the customers, owning the
relationships. As the company went digital, they brought in Salesforce to take
these customer relationships over, to monetize them, learn from them, and
increase their value over time.

PURE SUBSCRIPTION PURE USAGE This company began with a pure subscription model. Then, with new usage
insights, the company carved out a segment base of “over-users” who were
willing to pay more, and drove them to a new packaging and pricing tier.
FIXED VARIABLE

Today, this customer is thriving, because they learned something important.

PROS PROS Recurring revenue is the beginning, not the end. It’s a verb. It’s something
• Pricing is transparent and easy • Barrier to entry is reduced you do — to outrun every other company in your space, and win the race to
to understand • Price is tied to consumption product-market-pricing fit. Your revenue system needs to support that.
• Revenue is predictable

CONS CONS

• System overuse drives up cost • Revenue becomes unpredictable

of goods sold (COGS)
• Net customer retention may
stall or decline
• Fixed costs present a barrier
to sales
as usage goes up and down
• Purchase orders and contracts
need to be created before true
usage is known

Both of the pure approaches can come with pitfalls. Pure subscriptions can
lead to overuse, which stresses your system and reduces your cost of goods
sold (COGS). As for pure usage, revenue becomes unpredictable, and it’s hard
to create purchase orders and contracts. So, for most companies, the best
solution will be somewhere in between.

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C H A PT E R 3

Building a Strong
Subscription Strategy
The shift to subscription is not a single leap, but a journey of many To build subscription revenue, build subscription products. Here’s how
steps, and you’ll need to think through three major components of your to begin:
strategy: your products, customer lifecycle, and business capabilities.
Product structure and pricing: Now’s the time to redefine your product
1. Reimagine your products structure, so you can consolidate your SKUs and enable dynamic pricing.

4 areas of a subscription product that need new capabilities: One of our customers had more than 30,000 SKUs to account for different
variants from within their traditional product model (global license versus
country license, gold versus silver, the list goes on.) After moving to a
P RO D U CT ST R U CT U R E P RO D U CT P R IC I N G subscription model, and with help from Revenue Cloud, the company
Product Catalog Tiered Pricing consolidated these 30,000 SKUs into two different products.

SKU Rationalization Land and Expand Product delivery: Next, you’ll need to rethink how you deliver products.
B2B companies are taking a page from the B2C playbook, and making their
products faster and easier to purchase and access. Do what you can to
make licenses more immediately available for your customers, so they can
P RO D U CT D E L I V E RY M O N I TO R I N G
buy them and use them on their own terms.
Product Provisioning Usage Monitoring
Product usage monitoring: Sales, support, and customer service need
License Management In-app Feedback to work together on the same platform to find — and fix — any issues in
customer use and adoption. In a successful subscription business, the
north star is positive attrition, where customers add on more licenses and
services month over month. To get there, you’ll need capabilities for usage
monitoring, so you can understand how customers are using your product.

6 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com
2. Envision the new customer lifecycle, end to end

Subscriptions change the entire quote-to-cash process, because

now a customer doesn’t just represent a one-time sale, but a lifecycle What is quote-to-cash?
from acquisition to renewal. Businesses making the shift will need to It’s the journey the customer goes through, beginning with the intent to
connect customer touchpoints into one holistic journey, something purchase a product or a service, and ending in payment. The quote-to-cash
that requires new capabilities and new cross-functional partnerships. process is about managing the bloodline of any organization — revenue.

The subscription model needs connected touchpoints across the

buyer journey.

MARKETING SALES CPQ BILLING S U CC E S S S E RV IC E

Capture customers Structure deals Close complex Integrate billing Provision the Automate the
more efficiently around robust deals faster as a touchpoint product for ease revenue lifecycle
pricing models in the customer of access and
journey onboarding

The action here is to map out the new customer journey that aligns to
your new product and pricing strategy. Bring awareness to the silos that
are preventing you from bringing this journey to life, and think about
how you can form new partnerships that break these silos down.

In the old model, it makes sense for teams to focus on functional goals.
Sales will always focus on closing deals, while finance will always focus
on making sure the math adds up. But in the new model, where an
attrition problem can quickly become an existential problem, revenue
milestones like renewals need to be compelling sales events as well.

So, sales and finance need to work together as never before. They’ll
need to replace their old functional goals with a new shared mission
that’s customer-first. But it takes more than collaboration to make all of
this possible. You’ll also need the right technology.

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3. Build new capabilities through technology

Recurring revenue calls on you to “re-win” your customer every renewal

cycle. So, you need to become more customer-centric than you ever
were, and focus on creating a great, omnichannel buying experience.

Every team will need customer-first capabilities. Marketing will need a

way to manage customer journeys. Sales will need a way to automate
renewals and stand up new channels like e-commerce. Service needs
to allow for self-service. And customer success and finance alike need
to track usage.

Managing recurring revenue also brings shiny new metrics into the
picture: annual recurring revenue (ARR), average revenue per user
(APRU), and churn. New capabilities can let you report on leading
indicators like these, so you can learn from your subscription and
usage business, and make your revenue more predictable.

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C H A PT E R 4

How Salesforce Revenue

Cloud Can Help
Revenue Cloud was built from the ground up to speed up your
revenue. First, we speed up your customer understanding by giving
you a 360 degree customer view (what we call the Customer 360).
Then we speed up your go-to-market for subscription and usage
offerings, by connecting together all of your revenue activities
on one platform.

First, we speed up your customer

understanding by giving you a 360
degree customer view. Then we speed
up your go-to-market for subscription
and usage offerings.

Benefits:
• Transform the buying experience.
• Accelerate new revenue streams.
• Increase revenue efficiency.

Let’s take a look.

9 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com
Transform the buying experience.
B2B companies can take a page from the B2C playbook, and make it fast and easy for customers to buy (and pay) on their own terms.

This shows a portal where a customer can pay their own invoice, without needing to call the company and speak to someone in finance:

10 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com
Launch new revenue streams.
If you sell it, we support it. Accelerate your time to market for new innovations, like new channels (partners, self-service, e-commerce) and new products
(subscriptions and consumptions).

Here a customer chooses a usage tier through a self-service channel.

11 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com
Optimize revenue efficiency.
Get a single source of truth for all your revenue data, in real time. And scale, with automation and ERP integration.

Your one-stop shop for revenue data:

12 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com
Your next steps Watch
a demo video on how Revenue Cloud
Ready to learn more about how you can manage subscriptions supports new revenue models.
and usage with Salesforce Revenue Cloud? Get started with these
resources.
Watch Demo

Revenue Cloud has allowed us to easily

manage our subscription business and
create recurring relationships.” Take
the Trailhead module for Revenue Cloud.

RUCHIKA CHOPRA | HEAD OF BUSINESS SYSTEMS | JUNIPER NETWORKS

Start Module

Check out
our product page for the details on how
we can help.

Learn More

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14 | How to Speed Up Revenue with Subscription Model and Usage Models salesforce.com