I’ve been running a lot over the past year
Training for the 2020 Boston Marathon, specifically. The marathon didn’t go on as usual, due to the COVID-19 pandemic. (The race went virtual, as did so many other athletic events this year.) But running hundreds of miles gave me plenty of time to reflect on similarities between what race organizers and software suppliers need in order to be successful: clear insights into what the end-user needs.
In a race, some of what the end-users—the runners—need is easy to recognize: an efficient pre-race expo where racers pick up bib numbers and t-shirts, coordinated road closures on the race course, and aid stations with water, calories and medical care for runners. Even more is required to meet the specific needs of thousands of runners (around 30,000 for the Boston Marathon). Some racers will be competing at record pace; others simply want to make it across the finish line (my cohort!). Some will need space blankets to stay warm on a blustery Massachusetts day; others will search for ice packs if the day is atypically warm. Some will be familiar with the host city; others are tourists who benefit from guidance about how to navigate around town.
Just as not all racers are the same, not all software customers are the same. Software suppliers must recognize the varied ways that customers consume software in order to know what deployment (SaaS, on-premises and/or embedded) and monetization (subscription/term, usage-based, outcome/value-based and/or perpetual) models best meet users’ needs. Finding—and providing—that match is what can secure an ongoing relationship between supplier and customer. In today’s world of rapid innovation, with the growth of SaaS and of IoT devices, rapid adjustments are perhaps more important than ever. Following are a few lessons to help tech companies meet the needs of users.
Embrace Hybrid Models
As companies respond to the demands of COVID-19, many are finding ways to protect their revenue. The majority of technology CEOs implemented changes to pricing, packaging and/or contracts in response to the crisis. Suppliers must continue to show this kind of adaptability to succeed in this particularly competitive landscape.
Customers engage with software in a way that demands hybrid monetization and deployment models. Software suppliers must offer more than a single solution for how their products are sold and delivered. They should consider not only where their software runs (the deployment model), but how it is priced and licensed (the monetization model). As shown in the 2020 Revenera Monetization Monitor: Monetization Models and Pricing, subscription and perpetual monetization models are dominant, while the greatest growth will be seen in subscription (set to grow by 53% in the coming 12–18 months) and usage-based models (set to grow by 48% in the same timeframe). When it comes to deployment models, most companies offer a mix, with SaaS showing the fastest growth (67% in the coming 12–18 months).
Strike a Balance
To successfully implement hybrid models, software suppliers must have robust knowledge of how their products are being used. Clarity into usage, user personas and priorities is essential for balancing price and value. These hybrid models also require flexible solutions for entitlement and usage management.
Many suppliers, though, report that they have insignificant insights or have difficulty gathering product usage data. Without this, the gap between price and value may remain, adding undue stress to the customer relationship. (Only 46% confidently say that they feel price is aligned with the value they provide to customers.) Defining and tracking appropriate usage metrics and knowing what features users embrace, for example, are important steps toward aligning price and value, yet only about a third (32%) of software suppliers believe that they currently do a good job of gathering product usage data.
Know Your Motivation
Before moving to a new pricing and licensing strategies, understand your organization’s motivations. For companies that are planning to change license strategies in the coming 12–18 months, the top motivators are to tighten license controls, accurately price usage, and lower the barriers to entry. Planned changes include adding/improving automated enforcement, adding new pricing meters, providing temporary evaluation or try-before-you-buy options, moving to user-based licensing, adding customer audits, moving to device-based or concurrent licensing, removing/reducing license enforcement, and/or removing customer audits.
Among organizations that changed monetization models over the past two years, the needs to respond to competitive dynamics and to improve relations with customers have been the main priorities. Among those that plan to do so, the top goals are generating more revenue and accelerating the sales cycles.
By understanding its motivations, tech companies can create effective programs for pricing, delivering and monetizing software. Clarity into what your users need is essential. Just as with running a marathon, having a plan, using the right tools and measuring your progress are critical to success. If you monitor, measure and meet your customers’ needs, you’ll be ready not just for race day, but for a strong ongoing relationship, now and as the economy recovers.
About the Author
Michael Goff is Principal of product marketing at Revenera, focused on software monetization and usage analytics solutions. Revenera’s solutions help software and IoT companies build and deliver secure products while protecting their IP. Make a great first impression with your software – with the gold standard for Windows and multi-platform installations.
Featured image: ©Photocreo