20 Nov Building your install base: Subscriptions
by Erich Rusch
As more and more businesses enter the modern era of the subscription economy, we need more than just an asset to manage the necessary information about the products we’ve sold our customers. We also need quoting functionality that allows companies to process recurring revenue transactions. This functionality is known as the subscription. Although many older systems rely on assets to support recurring revenue transactions, we believe that it’s simply a different kind of install base object relative to assets. Subscriptions inherently rely on not only quantity but also time to adequately represent the commercial agreement with your customer.
Represent your customer relationship with subscriptions
Subscriptions should represent not only the relationship but also how the relationship has changed over time. Initially, most subscription-based products were intangible items like warranties, maintenance, and subscription software products. However, more and more companies that sell physical goods are finding ways to create innovative business models around subscriptions. Companies are choosing this path because subscriptions are designed to be flexible so that they can be expanded, upgraded, or changed within an active contract at any time. Subscriptions represent the nature of these items far better than asset workarounds do.
Differentiating assets and subscriptions
The flexibility of the subscription is the critical differentiator from the asset, which is not designed with the same flexibility in mind. I tend to think of assets as more immutable than subscriptions outside of a few cases where parts might be upgraded within an asset, or some components might be changed as the result of a repair in a field service engagement. Now, you might be tempted to ask what happens in the case where there are products that behave like subscriptions that can be offered as a part of an asset? That’s where subscribed assets come in.
Take for example the case of a premium maintenance offering within an asset. Often during the quoting process, one of the key ways our customers can raise margins and offer better service is through a premium maintenance subscription. This was the case with one of our manufacturing customers from the Midwest. In this case, we might move a customer from 9×5 support to 24×7 support, and charge one thousand dollars more for the service. In modern CPQ, we can create a relationship between the base asset and the subscription products that are associated with it. This is known as a subscribed asset. Now we have the flexibility to leverage the subscription functionality of CPQ with the power of a native Salesforce asset! You can leverage this functionality with warranties and maintenance, add-on software subscriptions, and many more!
In the last two parts of our series, we’ll talk about how Salesforce and Oracle are changing the game in CPQ by allowing you to form deep, meaningful relationships with your customers. We’ll show how you can change, grow, and collaborate like never before with your customers during the quoting process.
Erich Rusch is Director of CPQ Presales Solutions at Simplus. Co-founder and CSO of CirrusOne until joining Simplus, Erich has years of experience in the CPQ space and has unparalleled expertise in cloud solutions.