What is subscription revenue?
Subscription revenue is defined as income generated by a business model built on customers paying fees at regular intervals, such as weekly, monthly, or annually. A subscription revenue model generates recurring revenue through long-term relationships with customers.
If you sell a subscription-based service or product, the effective use of subscription models can help sales teams increase revenue, reduce administrative oversight, and efficiently scale their efforts. This is why companies are urgently prioritizing the implementation of sales software solutions that empower sales teams to manage and optimize subscription revenue.
In this article, we explore four common issues faced by sales and customer success teams when it comes to subscription management, and how they can solve them using CPQ and subscription management software.
4 subscription management challenges
The B2B subscription business model presents its own unique challenges, and the chief among them is subscription management. A lack of strategic framework, substandard enforcement of strategic pricing, inappropriate or rogue discounting, and quoting errors and inaccuracies can create an overflow of mistakes, lost revenue opportunities, and potentially increase customer churn rates.
These obstacles put your sales teams at a major disadvantage, so properly understanding them and how to effectively solve them is key to the proper management of your subscription-based business.
1. Absence of a strategic framework
With no clear strategy or framework set in place to manage subscriptions, CSMs and Account Managers will find it difficult to maximize recurring revenue and discover that managing subscriptions is a lengthy and error-prone manual process.
The absence of standardized processes also leads to poor decision-making and inconsistencies among sales reps and customers. This can lead to a sub-standard or inconsistent customer experience, lower-than-expected customer retention rates, and damage to your company’s credibility.
To counter that, subscription management provides a strategic framework around pricing, cross-selling, upselling, and bundling. It ensures that CSMs and Account Managers are following best practices and that revenue is being optimized.
2. Poor enforcement of pricing strategy
Every company has its own pricing strategy made up of subscription pricing rules and guidelines that should be followed by sales reps. Unfortunately, often they are not enforced for a number of reasons, such as a lack of sales training, poor oversight, no sales automation, and human error.
This can have a huge impact on predictable revenue. Failure to standardize and enforce pricing rules and guidelines means you’re probably missing opportunities to maximize revenue, and leaking revenue elsewhere.
3. Inappropriate discounting decisions
Negotiations with buyers often result in the offering of a discount. In some cases, a rep who’s concerned about hitting quota or about losing a deal may offer customers a discount too early in the sales process and offer a large discount that undercuts the profit margin strategy set forth by leadership. Without proper governance to prevent this kind of behavior, potential revenue is lost, making it difficult to meet goals and accurately forecast revenue.
4. Quoting errors and inaccuracies
Outdated manual processes lead to wasted time, errors and inaccuracies. For example, when sales reps pull product or price information from a spreadsheet – no matter how accurate – they may perform miscalculations and introduce mistakes. This creates numerous risks for sales leaders, such as missed revenue opportunities, poor discounting decisions, and potential churn. But poorly managed data and inaccurate pricing are easily avoidable.
How DealHub improves subscription management
With DealHub CPQ, you can provide a clear framework for subscription management to improve discount governance, enforce pricing rules and guidelines, and generate accurate and optimal price quotes. Here are four key ways DealHub enables you to do so…
1. Automated renewals
For companies with subscription-based business models, DealHub takes the manual work out of creating renewal opportunities. All deal and customer information are automatically captured and stored securely within the DealHub subscription management system, which is located in your CRM. In addition, you can automate contract terms based on what customers previously ordered. With automated renewals, when the account manager or sales rep is ready, there’s no need for human involvement – thereby reducing errors and inaccuracies.
2. Discount approval workflows
DealHub CPQ ensures proper discounting through pre-configured discount approval workflows.
Employees offering inappropriate discounts harms margins. Our CPQ automates discount approvals based on limits pre-defined by management. If a sales rep offers a discount beyond that threshold, it will be automatically sent for approval. Once approved or denied, they can quickly send out the quote. This guarantees sales reps are sending quotes that remain within the parameters authorized by leadership.
3. Standardize subscriptions with rule-based logic
With DealHub CPQ, leadership can create a single playbook to standardize subscriptions so the contract terms and pricing products of the deal are set correctly every time. The playbook is fully configurable, so anyone — not just sales ops — can easily make changes to accommodate frequent changes in pricing and product plans. Because everything is up-to-date and accurate, you can easily standardize subscriptions to ensure the right sales choices are being made every single time.
Instead of having to wade through contracts to ensure terms are favorable, sales reps can use rule-based logic to deliver contract terms that meet leadership expectations. Playbooks can be modified by management quickly and easily to reflect new strategies, making them the dynamic solution to maintaining tactical continuity even as strategy evolves.
“As an administrator you can tailor questions for your sales team to allow for easy proposal generation. Building in product bundle variants, conditional pricing, and approvals lends itself to process standardization, which enables our sales reps to sell faster without hours of training.”Ryley Giard, Salesforce Solutions Architect
4. Maximize upsell, cross-sell and bundle opportunities
Instead of digging through spreadsheets to manually assemble price quotes, sales reps can have the optimal mix of products automatically generated for them. With the customer’s data and previously ordered items already stored within the system, sales reps can make better selling decisions and maximize upsell, cross-sell, and bundle opportunities. A dynamic sales playbook provides sales reps with guided selling and best practices that enable them to make the best choices for their customers and maximize revenue potential.
Maximizing subscription revenue stream
If your business uses a subscription revenue model and you want to improve and streamline your subscription management, it’s paramount to implement the right software to help your sales reps succeed and maximize your subscription revenue.
DealHub CPQ allows sales reps to easily automate renewals, automate discount approval workflows, and standardize subscriptions with a guided selling playbook. In addition, sales reps can maximize upsell, cross-sell and bundle opportunities which increases annual subscriptions and fuels revenue growth. And most importantly, they can provide customers with the best possible buying experience.
DealHub CPQ has been selected as a Top-50 Sales Product by G2 and recognized as a leader in the CPQ Momentum Grid. We have innovated the next generation of CPQ to empower teams to connect their tech.