Subscription-based services are becoming increasingly popular, from the software on your laptop to the apps on your smartphone, like Office 365 and Spotify, and even streaming services like Netflix on your Smart TV. This trend of expecting subscriptions is now moving into professional environments and the communications sector.
A subscription pricing model means users pay a regular fee (monthly or yearly) for certain services without any initial costs. Unlike variable costs in a consumption model, where monthly charges depend on usage, subscription models offer a fixed rate.
They also give users the flexibility to select and bundle the services they need into one easy subscription.
The 2021 Zuora Subscription Economy Index™ (SEI) showed that subscription-based SaaS companies grew by 16.2%, with a 19.4% compound annual growth rate (CAGR) from 2018 to 2021.
Are you offering your customers a subscription option for your cloud-based phone services? Here are some compelling reasons to consider it immediately.
Financial Security
Offering cloud services through a subscription-based model provides a steady and reliable source of income every month. This approach ensures consistent revenue, which is more secure than the thrill of a one-time large sale.
This stable revenue stream from committed customers not only brings excitement but also security, as it helps safeguard the future of your business. By having customers sign up for monthly subscriptions, you secure a predictable income that you can count on well into the future.
Adopting a subscription-based model not only stabilizes your company's financial future but also provides a solid advantage when discussing revenue with investors, stakeholders, or banks. This model is gaining momentum rapidly. Mark Thomason, the research director for Digital Business Models and Monetization at IDC, noted, “The subscription business model is expanding fast, with a compound annual growth rate (CAGR) of 17.9% from 2020 to 2025, and it's expected to make up 83% of total software revenue by 2025.” This trend underscores the increasing reliance and value of subscription services in the software industry.
Increasing Your Sales
The subscription economy has seen a remarkable growth of 435% over the past nine years, highlighting the lucrative potential of subscription-based services. By offering your cloud phone system on a subscription basis, you can enhance each sale with add-ons and bundled options.
Although the monthly subscription fee is typically lower than a one-time upfront payment, this can be offset as customers are more inclined to include additional services either at the outset or as their needs evolve, boosting your long-term revenue.
With the flexibility to choose from bundles and add-ons, customers can tailor their subscriptions to their specific needs.
This approach not only caters to those who require a comprehensive suite of services but also accommodates customers who need just the essentials, allowing you to capture a broader market.
Spend Low, Profit High
As a Service Provider or Managed Service Provider (MSP), launching a subscription-based cloud telephony platform is far more cost-effective than purchasing and reselling an on-premise solution. This approach can lead to significant savings.
Whether you're new to being a Service Provider or MSP, expanding your offerings to include cloud or unified communications (UC), or simply aiming to boost your sales, adopting the subscription model can accelerate your return on investment. Once you sign up, the product is market-ready, allowing you to begin earning recurring revenue from your very first sale. This immediate income stream is one of the major benefits of the subscription model.
Increasing the Number of Customers
The subscription-based model not only offers a competitive advantage for Service Providers and MSPs but is also becoming a customer expectation. If you don't provide this option, your competitors likely will.
The smaller monthly cost of a subscription is often more appealing to customers, especially when you clearly demonstrate the value relative to the price. This model is ideal for those wary of large upfront expenses, as it allows customers to sign up with minimal financial risk and adjust to a budget that works for them. Additionally, you can tailor pricing models to fit various customer needs, including offering custom bundles at special rates.
Subscription-based cloud services also open the door to new customer segments. For example, users hesitant about transitioning from on-premise systems to the cloud will find the scalability and multi-tenancy features of cloud services appealing. They can start with a small commitment and increase their usage as they become more comfortable, minimizing their risk.
This model enables you to swiftly adapt to market trends or focus on specific niches. With a subscription service, it’s easy to roll out the latest features and services to your customers, keeping them continually updated and satisfied.
Build Customer Loyalty
When customers choose a monthly subscription, they're committing to your organization long-term, showing their loyalty. This commitment gives you a great chance to keep them happy, engaged, and open to additional services as your company expands.
Research shows that 64% of consumers feel a stronger connection to companies they subscribe to compared to those where they make one-time purchases. This ongoing relationship offers a unique opportunity to continually enhance both your product and the customer experience.
Unlike one-time purchases that can become outdated, prompting customers to shop around, a subscription keeps you as their first choice. You can continuously impress them with updates and new features, often before they even request them.
A great example is video conferencing. Its demand soared in 2021, and the Global Web and Video Conferencing SaaS market is expected to hit $7 billion by 2026. For Service Providers or MSPs, offering a subscription-based service means they can introduce new features to existing customers without needing to secure a new sale, keeping them ahead of competitors who might lure customers exploring new options.
Keep Things Secure
As we move further into 2020s, security remains a top concern in the technology and communications industries. With cybercrime and data breaches on the rise, the cloud is a valuable ally, offering advanced security features and disaster recovery options. For subscribers, this means receiving automatic updates that include crucial security patches and fixes, ensuring both their peace of mind and yours. Software that's not kept up-to-date is more susceptible to attacks, and the capability to automatically update your subscribers' software without additional purchases increases everyone's security.
When you sell a subscription-based cloud phone system, it lifts the burden of security from your shoulders as the Service Provider or MSP. The security measures are integrated into the solution's framework, with the product owner responsible for continuous maintenance and updates. This setup not only simplifies your role but also enhances the overall safety for your customers.
The Need For Flexibility
Flexibility is crucial in the fast-evolving fields of communications and technology. As new features and technologies emerge, offering them to your subscribers through automatic updates can keep you ahead of the curve. This adaptability in your solutions enhances customer satisfaction by staying current and responsive to changes.
Rishi Kulkarni, VP and Cloud and Custom Applications GTM Lead for Capgemini Americas, notes that “subscription-based services provide higher resiliency and performance due to their in-built multi-tenancy and scalability design.”
Cloud solutions that incorporate multi-tenancy allow your customers the flexibility to adjust their usage up or down based on their current needs. This is especially beneficial for those just starting out, those transitioning to a cloud platform, or those who need to manage their budget during fluctuating times. With a subscription model, scaling services to fit changing requirements becomes seamless and efficient.
Be Prepared
The chance to boost your profits, future-proof your business, and strengthen customer loyalty is right in front of you. The trend towards subscription-based cloud services is growing, and soon it will become the standard expectation in the market. Now is the perfect time to get ahead of your competitors.
We're committed to supporting sustainable, recurring revenue through our subscription-based cloud products and solutions for Service Providers. We've developed a product featuring true multi-tenancy and have a dedicated global team of IT and product specialists who work tirelessly to ensure our offerings remain relevant, secure, and continuously updated.
If you're prepared to launch this product and start generating steady revenue, reach out to us today to begin your journey.
