Q

Are CRM software subscription models the future?

Companies' success with subscriptions has been mixed. But CRM subscription models provide key customer insight, says expert Denis Pombriant.

What is the effect of subscription metrics, like deferred revenue, on a company's performance and how does that

relate to subscription vendors?

Success with subscriptions isn't automatic, so developing metrics about how customers use your service and the indicators of what they like and don't like is key because there's less direct contact between a vendor and a subscriber. As a group, subscribers like to take something and get it done, and there's a period early in the subscription relationship where the vendor might lose money as the customer comes up to speed.

So, developing metrics about times to first use, ratio of users to first provisions and time using the product begins to give the vendor a sense of how things are going. It also gives the vendor, through analytics, the ability to see who needs help and to proactively offer it rather than waiting until a customer gets frustrated and maybe quits. What deferred revenue is all about, in one way or another, is money that hasn't been counted as revenue.

So, for example, a vendor might sell a one- or three-year subscription and the customer might pay that all at once, but the vendor may only recognize one-twelfth of the annual subscription each month as that money becomes due and collectable.

This was first published in May 2014

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