More and more companies across a wide set of industries are moving to subscription-based models, and they are being rewarded.
According to McKinsey & Company, companies that shift to subscription models can often see a 30% to 40% premium in customer lifetime value over selling the exact same products on a non-subscription business basis. Zuora’s Subscription Economy Index shows that over the past seven years, subscription companies across North America, Europe, and the Asia Pacific have seen their sales grow by more than 300%, representing an 18 percent compound annual growth rate (CAGR).
The investment community has also embraced subscription-based business models in part due to the predictability of cash flows. Subscription revenue growth is critical to valuation as well as to a company’s ability to realize other benefits of subscription models. In order to grow, a subscription company needs to acquire new subscribers and retain them so that they can increase the value of each customer. Companies often wonder what kinds of subscription revenue growth should be prioritized.
To answer this question, the Subscribed Institute collaborated with McKinsey & Co. Together, we analyzed Subscription Economy Benchmark data from over 700 companies to determine what subscription companies should focus on.
Get this benchmark report for data and key findings that illustrate:
- The kind of growth that B2C companies should focus on
- Growth Rate vs Revenue and how this relates to returns of scale
- How pricing changes can be an important acquisition lever for B2C companies