This is especially true for businesses that provide software as a service (SaaS). The shift is taking place for two reasons: first, customers now expect software companies to be more agile when it comes to offering upgrades; and second, it’s now easier than ever to offer monthly subscriptions rather than one-time payments.
The new licensing model is known as “subscription pricing,” and the following are some of its advantages. Customer Growth: You’ll be able to scale your business more quickly, enticing customers to upgrade without breaking the bank.
Because your customers can buy your product on their own terms, you can gain more paying customers and in turn higher long term recurring revenue. Also, a subscription pricing model can also benefit your customers. The ability to pay only for what they use. And you can manage all of this directly inside the CRM with integrated subscription services.
Customers with low-value needs, such as those who only require a small amount of software, will now be able to use the product without paying a high price. Customers with high-value needs, on the other hand, will have an incentive to upgrade and continue using your services. This means you’ll have more revenue as a result of higher retention rates, as well as additional revenue from upgrades.
Even businesses that sell enterprise saas products are adopting this pricing model. Slack, for example, uses a freemium business model that allows users to use software for free for as long as they want. Users will be billed automatically if they use more than a certain number of paid features in the app.
Atlassian, for example, has been offering its JIRA software as a subscription since 2011. JIRA was initially sold as a traditional piece of software by the company. However, they realized that switching to a recurring revenue model would allow them to grow more quickly by releasing new upgrades every three months. Atlassian’s winning strategy paid off when JIRA became the most popular project management tool across industries.
The shift from selling perpetual licenses to subscriptions offers has also enabled an increasing number of software companies to evolve how customers use their products over time. Instead of selling and delivering large upfront packages, software companies can now sell smaller “snack-sized” packages with lower entry points and lower upgrade costs (if at all).
To understand why software is moving to subscription, you must first understand the benefits it provides. Subscriptions business models are paving the way to the future by providing benefits to both the company and its customers.