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Recently, many enterprises have realised the importance of recurring revenue and have adopted subscription-based pricing models. New research from the international growth strategy expert Manifesto Growth Architects revealed that 70% of businesses have moved towards a subscription model.

https://www.globalbankingandfinance.com/how-to-make-money-from-membership-economics/

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However, subscription models alone do not bring optimal revenue growth. In fact, it also attracts a few challenges for businesses, for e.g.

These challenges can be addressed using a much finer and optimised pricing model called “Usage-Based Pricing”. There are many names and forms of this pricing model, but the most common ones are: Consumption, Pay-as-you-go, Value-based pricing (My favourite terminology), Time/Unit-based pricing and Pay per transaction. As it suggests, this pricing model allows customers to pay for the value that they receive. Customers subscribe to products or services, but then pay based on the usage, unlike a standard flat subscription price.

 

The advantages of usage-based pricing are that:

 

To demonstrate the advantage of the usage-based pricing model, let’s analyse some of the public SaaS companies using this model. These companies are expected to grow revenue at a faster rate and are growing more efficiently compared to a broader list of 50 public high-growth SaaS companies. With usage-based pricing, these public companies are experiencing faster and more efficient growth. As a result, compared to their peers, they are being valued at a premium (24.8x vs 17.7x) by the public markets.

 

Source: NDR are from Company filings (S-1 or 10-K), EV/Rev Multiple Representative 01/06/2021, Revenue Growth are Analyst Consensus Estimates for FY 2021-2022 Revenue as of 01/06/2021

 

 

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“Customers are well aware that a usage-driven pricing model will encourage service providers to keep their customer engagement at the highest level at all times, not just during renewals”

 

 

Although the usage-based pricing model provides numerous advantages, moving to this model does bring a few challenges, for e.g.

 

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Using Usage-Based Pricing on the Salesforce Platform:

Most of Salesforce based CPQ/Billing products provide support for usage-based pricing & billing. Salesforce CPQ/Billing and Apttus/Conga CPQ/Billing have extensive support for this model, with variations to address different business needs.

 

Key points to be aware of:

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Usage-based pricing model suits certain businesses better, and may not be suitable at all for other businesses. So, do your thorough analysis before implementing this model.

 

02

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For some business, a hybrid approach is more profitable. Remember that subscription, usage-based and even one-time billing can co-exist for a business.

 

03

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Usage-based need not to be always per unit. It can be based on volume, multiple attributes, range based etc.

 

 

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Conclusion

The usage-based pricing model aims to provide flexibility to customers so that they pay for the value that they need. It is a value-centric flexible model, but does come with few challenges. If you plan to introduce this pricing model, please feel free to approach to me.

 


Author : Ashish Arya

Ashish Arya is an enterprise Lead-to-Revenue Solution Architect, with a vast experience of implementing QTC business processes for enterprise customers on the Salesforce Platform. He currently works as a Global Solution Director with Hansen.


About Hansen

Hansen is a specialist consultancy helping you maximise Lead-to-Cash ROI. Our expertise is focused on unlocking value from your investments in CPQ, Billing and Unified Commerce on the Salesforce platform. We are actively engaged with organisations like the World Economic Forum, Jacobs Douwe Egberts, Deutsche Bank and Sandoz (Novartis) to transform their businesses at pace.

The “Hansen Difference” can be attributed to our CPQ and Billing heritage which is layered with process acumen established across many successful projects and industries. With Hansen, you can expect a trusted advisor invested in the success of our customers.

 

One of the key things that organisations have learned during the current pandemic is the need for a reliable and scalable revenue forecasting system, a flexible business model and uniformity across all sales channels. There are companies that have struggled to meet their revenue targets owing to the unprecedented business scenarios that have been thrown up by the advent of Covid-19, while other companies have struggled to meet the sudden spike in the demand for their products and services because they have siloed sales channels.

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Revenue and sales leaders across organisations are now recognising the need to reduce uncertainty around revenues, margins and prices, whilst at the same time being able to provide products to their customers in the most flexible way.  In order to drive continuous organisational growth, it is now imperative that Sales and Revenue teams spend more time on focused customer interactions and delivering an enhanced buying experience across all channels rather than worrying about incorrect revenues and fixed business models.

Salesforce has now taken another leap towards providing a total Customer 360 platform by launching Salesforce Revenue Cloud. The aim is to consolidate CPQ, Billing, Approvals, Order Management and Revenue collection as a single pillar which can easily integrate with B2B Commerce and Partner Relationship Management applications to provide a unified platform for managing true-revenue, target margins and real-time pricing through omni-channel sales capabilities.

 

While Salesforce Revenue Cloud brings numerous advantages for organisations, in this article we have focused on the top 5 business benefits that underscore the importance of having a scalable and well implemented Revenue Cloud solution:

 

01

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New Revenue Streams & Sales Channels

In situations where the direct sale channel has been adversely impacted, companies are looking to create additional revenue streams from new sales channels to increase income.  For example, EHS – a corporate sanitisation products and services company – recently launched a B2B commerce platform to offer a Digital self-service buying experience for corporates, offices and shops.  Results from the most recent quarter indicate that 70% of revenue was driven through this newly launched commerce channel.

 

02

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New (consumption based) Business Model

Organisations are now looking for more flexibility to adopt different business models and promote new offerings to customers. For example, a Software firm wants to offer not just yearly subscription but also a usage-based model for a recently launched Video Conferencing Software. This type of flexibility is easily achieved by adding a new pricing model (that leverages existing product usage telemetry) through the advanced CPQ + Billing package.

 

03

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New Product Launches

Gone are the days when companies had the luxury of having drawn out processes in order to launch new products or services.  “Time to market” is of the essence in a highly competitive landscape.  Advanced CPQ functionality, a part of Salesforce Revenue Cloud, accelerates the launch of new product offerings to simultaneously across multiple sales channels.

 

04

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Pricing Uniformity

In an increasingly competitive virtual business environment created as result of the current pandemic, companies are looking for ways to avoid pricing errors and to protect margins;  Pricing Managers and revenue leaders are demanding deeper visibility into pricing and margins across all deals.  As an example, a pharmaceutical company, owing to an increase in demand, recently launched partner and distributor channels using Experience Cloud (formally known as Community Cloud), which internally uses the same pricing model that was designed for the direct sales channel. This enables both CFOs and CROs to enforce a consistent pricing approach while gaining full visibility across all customer transactions.

 

05

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Revenue Reporting

A key requirement for businesses around the world is to have comprehensive revenue visibility and forecasting across all sales channels. Revenue Cloud, in conjunction with Tableau, can help organisations generate revenue reports which are accurate, widespread and detailed enough to inform vital decision making.

 

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Conclusion

Organisations across the globe now recognise the value in having greater visibility of their true-revenue position and the importance of improving the buying experience for their customers by delivering new, more flexible business models.  Salesforce Revenue Cloud brings together CPQ and Billing, Partner Relationship Management and B2B Commerce capabilities to help businesses drive more revenue across multi sales channels, acting as a single source of truth for all revenue transactions.

 


Author : Ashish Arya

Ashish Arya helps Hansen’s customers to define their Quote-to-Cash business process transformation strategy on the Salesforce platform. With many years’ experience implementing Lead to Cash products (Salesforce CPQ & Billing and Apttus) for large enterprises, Ashish works closely with customers to re-define their B2B sales processes, identify industry QTC best practices and execute successful CPQ implementations to exponentially improve margins and revenue.


About Hansen

Hansen is a specialist consultancy helping you maximise Lead-to-Cash ROI. Our expertise is focused on unlocking value from your investments in CPQ, Billing and Unified Commerce on the Salesforce platform. We are actively engaged with organisations like the World Economic Forum, Jacobs Douwe Egberts, Deutsche Bank and Sandoz (Novartis) to transform their businesses at pace.

The “Hansen Difference” can be attributed to our CPQ and Billing heritage which is layered with process acumen established across many successful projects and industries. With Hansen, you can expect a trusted advisor invested in the success of our customers.

 

Salesforce’s announcement of the Revenue Cloud has created a flurry of articles and whitepapers on what it is, how it can benefit customers, and naturally, how companies like us can help you chart the shortest path to success on the Cloud of all Lead-to-Revenue Clouds.

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Why it was conceived, I believe, is more important than what’s in it. Salesforce clearly saw an opportunity to improve monetisation across its well-established products in the world of Lead-to-Revenue by creating a subscription “bundle” (the irony is likely lost on my non-CPQ audience!). So, what’s the new wave of opportunities they plan on surfing?

My linear (read unimaginative and slow) train of thoughts steered me to the usual suspects: a pricing advantage generated by selling an aggregate subscription (bundle), deeper customer engagement across the complete Lead-to-Revenue journey – through “a complete solution” that appeals to multiple buyer personas from Sales to Finance, beating competitors claiming similar “Enterprise Cloud” and / or Revenue Management prowess – Conga-Apttus, Microsoft and Oracle come to mind, although, they’d need a few iterations (reincarnations even) before they could offer similar functionality with the same transactional ease we’ve come to expect from Benioff’sCRM”.

These reasons aren’t likely to be completely invalid; they would, however, serve to establish a tenuous connection at best, to the business driver behind the launch of Revenue Cloud.

A more plausible motivation is very likely the evolution of the B2B sales process to a more consumer centric digitised model. A highly tailored buying experience, a flexible customer journey, improved depth and frequency of recurring customer engagement, a safeguard against eroding margins, and now, COVID 19, are factors that have accelerated this trend.

A few B2B Enterprises have successfully pivoted to offer a “shopping experience” rather than relying only on the traditional Enterprise sales process. The (far more sophisticated) B2B buyer is now empowered to shape her own buying experience on her own terms and at her own pace. The resemblance to a B2C consumer – who have access to a commerce store front, a “shopping cart” and the ability to pick and choose products and interactions, to fit her unique needs – is uncanny.

The pivot to Consumerised B2B Sales, has reframed Sales from a Revenue Management perspective. Instead of “selling” product (think Alec Baldwin in Glengarry Glenn Ross), to generate a revenue, we are now talking about “connecting” Revenue Streams to the Enterprise. Sounds similar but it’s not. It’s an entirely different way of looking at the value chain. “Lead-to-Revenue” sounds antiquated and very circa 2020. There’s definitely a new process name lurking here somewhere, waiting to be coined by some clever management consultant…Revenue-to-Growth, perhaps? I tried.

The efficacy of a system, that enables this step change in customer centricity, is predicated on frictionless Revenue flow from prospects and consumers, all the way to Finance. Sure, configure, price, quote (and Billing & Rev Rec) continue to be essential building blocks, but only in context of Revenue Streams – the raison d’etre for the Revenue Cloud.

Revenue Cloud unites CPQ, Billing, CPQ for Partner Communities, CPQ for Customer Communities and CPQ and B2B Commerce Connector, Vlocity (industry) workflows, and Tableau’s real time insights to help customers model live Revenue Streams.

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If you are a Revenue Management Leader in a B2B Enterprise looking to benefit from this new reality, please reach out to us. Our “Revenue Growth Specialists” at Hansen are here to accelerate your Revenue Cloud journey through a diagnostic Health Check.

 


Author : Raj Chatterjee

Hansen’s Sales Director, Raj Chatterjee, is passionate about identifying and articulating differential value enabled through Enterprise software. He views every conversation with prospective buyers as an opportunity to discover and monetise untapped potential in their business. Raj loves to get into solutioning discussions but his attempts at actually designing enterprise solutions are usually foiled by his specialist colleagues more suited for that job!


About Hansen

Hansen is a specialist consultancy helping you maximise Lead-to-Cash ROI. Our expertise is focused on unlocking value from your investments in CPQ, Billing and Unified Commerce on the Salesforce platform. We are actively engaged with organisations like the World Economic Forum, Jacobs Douwe Egberts, Deutsche Bank and Sandoz(Novartis) to transform their businesses at pace.

The “Hansen Difference” can be attributed to our CPQ and Billing heritage which is layered with process acumen established across many successful projects and industries. With Hansen, you can expect a trusted advisor invested in the success of our customers.

 

Drive Sales Velocity through Einstein – Salesforce’s flagship AI tool

Salesforce unleashed the power of predictive analytics through Einstein, first launched in 2016. Einstein, often referred to as the “AI for CRM”) can be leveraged by businesses to predict future behavior while pre-empting corrective action.

According to an article published on NADAQ, “Salesforce.com (NYSE: CRM) estimates that AI-related CRM spending will jump nearly five-fold to $46.3 billion in 2021 from 2016 levels. This is why Salesforce is busy integrating AI features into its services, and its latest addition could help it attack a lucrative niche of the CRM space.”

Salesforce continues to bet on Einstein, AI, advanced analytics and their application (beyond CRM) as indicated in its 2020 Annual Report

Most organisations struggle with the technical expertise and infrastructure required to develop and / or deliver results using Artificial Intelligence solutions. Salesforce Einstein bridges that chasm by providing a suite of tools enabling companies to monetise their data through intelligent insights.

Sales Rep’s can generate qualified leads faster, improve conversions and accelerate wins by leveraging Einstein’s predictive guidance as follows:

 

Lead scoring

Sales Cloud-Einstein can automatically analyze historical sales data to surface top factors that determine the probability of a lead converting to an opportunity. Data science augments the Lead Scoring process while machine learning improves the accuracy of predictions over time.

Einstein factors in lead/prospect sentiment by analysing historical engagement and trends in order to identify targets with the highest win probability.  Lead insights offered via Einstein provides a competitive advantage to Account Executives by focusing them on leads with the highest propensity to subscribe.

 

Account Insights

Account level insights are are generated by analysing the account dynamics gleaned from thousands of news articles each day.  Major events and developments in target accounts inform the buying propensity of a prospect / existing customer. To add to that, the analytics offer guidance at a more granular level to focus the sales team on challenges and issues addressable by the solution or product on offer. By aligning with prospect/customer’s pain early in the sales process, Account Executives can differentiate their offerings more effectively while accelerating opportunity closure.  An indicative summary of benefits driven through “intent data” and better proposition – pain alignment is as follows:

 

Einstein Opportunity Insights

Einstein leverages Sales Cloud data from historical sales cycles and engagement with customers (e.g., email) to identify unique patterns over the course of a customer’s buying journey. It layers past behaviour with trends to predict opportunity health and recognizes when deals are on track Vs being at risk; alerts and/or insights surfaced can guide sellers on counteractive measures to prevent the opportunity from getting derailed. In addition to course corrections, the insights inform situational tactics – recommendations on product offers, for example – that can increase win probability and reduce cycle time. A high level summary of feature-functionality enabled via Account Insights:

 

 

Einstein Activity Capture

Sales representatives can focus on what matters most – progressing opportunities – instead of the operational tasks like recording and linking various events to the various stages of the sales cycle.  Einstein allows seamless integration with Microsoft and Google to capture email and calendar events When reps send and / or receive email and calendar events, Activity Capture adds the messages to the Activity Timeline records in Salesforce – no manual data entry is required at any stage. The captured messages are visible across the Activity Timeline so the entire sales team can stay informed in real-time.

 

The average rep spends upto 28 hours per week reading and answering email. Providing reps with the ability schedule meetings, disseminate information, and negotiate deals via Activity Capture frees up time that can be used to engage buyers instead.

In addition to the operational efficiency enabled via this process, email insights are surface to inform the interaction with a contact.

Key benefits of Activity Capture:


Author : Parag Sharma

Parag Sharma is one of Hansen’s techno-functional Salesforce Quote to Cash experts.  He has had a variety of roles including Technical Lead and Technical Architect successfully delivering multiple full project lifecycle CPQ, Billing and CLM implementations into enterprise organisations across multiple verticals.

parag.sharma@hansen.co.uk


About Hansen

Hansen is a specialist consultancy helping you maximise Lead-to-Cash ROI. Our expertise is focused on unlocking value from your investments in CPQ, Billing and Unified Commerce on the Salesforce ecosystem.