In the face of these challenging times, companies must take bold moves to survive. For many this means digitally transforming to offer customers their products as a remotely accessible service. The key when implementing any such change, is to ensure it both appeals to customers and ultimately generates revenue. Launching a service can be fraught with difficulties if the right strategy is not put in place, which results in a service that doesn’t appeal to customers and isn’t built for long-term success.
Through software monetization, companies can maximize the value of their software in new ways, generating innovative revenue streams, improving operational efficiency and gaining valuable insights. By taking advantage of these opportunities, organizations will create flexible business models that offer highly personalized and fully connected user experiences, and significantly increase their customer satisfaction.
But while software monetization presents a potential goldmine – a chance to provide customer value, improve service and increase sales – it is a complex and iterative process. So, what are the key steps along the road in making a successful transition to a software monetization strategy?
Data use is the key
The first step is capturing the right data for decision making. This means having visibility of usage and adoption of the products the company is selling, as well as the ability to examine growth trends on new offerings across sales channels. Data such as this is vital in developing the next iteration of a product and enables companies to understand which features are popular with customers and should form the basis of the next version.
Zoom, the cloud-based video communications app, has done just that with the launch of OnZoom, a unique online events platform and marketplace that allows paid Zoom users to create, host and monetize anything from a yoga class to a concert. By being dynamic, and having a laser focus on key metrics, Zoom’s been able to monetize based on usage and launch a new product it knows there will be demand for.
This form of software monetization – whether through pre-paid or post-paid models – is emerging as the next trend after the move from perpetual to subscription-based business models. But nothing is ever truly guaranteed, least of all in business, so even with all the data to hand, how do companies ensure any changes to their models are successful in the long-term?
Test the waters
In the current climate, it would be foolish for businesses to commit to a new way of doing things without a trial to test and then re-shape their offerings based on the results. So, while most companies aren’t moving to a usage-based model entirely just yet, they are starting to introduce them for certain features and functionalities.
It also gives companies the chance to test certain packages amongst different sets of customers to determine which features they prefer. This can also help businesses to understand how people respond to different types of products, which products bring the highest revenue and if any should be eliminated. This process allows organizations to experiment and then refine and expand on their model.
Justify the charges
The way customers consume technology products and expect to receive services is changing and companies like Spotify and Netflix have proven that consumers will pay for content in a subscription format if the quality and value is there. But the question of what customers will pay for, including social media, is complicated.
With Twitter confirming that its exploring additional ways to make money from its users, including implementing a subscription-based model, questions arise over how and when it would start charging customers, and how it would use a subscription offering to drive additional value.
Transitioning from a free model to a paid service, as Twitter may find, is a challenge and requires careful planning and flexibility as well as thorough consideration to ensure long-term stability. Others may be in a situation of changing how they make customers pay in general – moving them from upfront one-time purchases to tying them into a subscription model.
Whatever the payment process, the cost must be justified, and companies need to ensure that those services are substantial enough in order for people to pay. Medium, an online publishing platform, has struggled with this and its move to monetize has been troubled at best, with writers accusing the business of “offering nothing” and being “ripped off.”
While social media may soon grab the headlines as the next frontier for software monetization, any company looking to make the same transition to a subscription model must make sure they’re able to offer that additional value, instead of it seemingly being just another cost.
As the way people consume technology continues to evolve, and the adoption of cloud and mobile technologies increases, software vendors must continually rethink their monetization strategy and adapt quickly to the changing buying and consumption patterns of their customers. Maybe they once paid for the right to use a product and now they only want to pay for what they actually use? The further challenge once the strategy is in place is how to manage this process internally across the business infrastructure. Therefore, choosing the right technology partner becomes another key step in that strategy.
This demand for new ways to purchase and consume software is driving organizations to find creative ways to evolve. Having the capacity and flexibility to implement new – or multiple – software monetization models can not only help boost revenue but give companies an edge over their competitors.
There has never been a more challenging time for businesses, with a troubled economy, worldwide pandemic, post-Brexit world and fiercely competitive marketplace. It is more vital than ever to develop the right strategy and then employ the right tools to deliver that strategy. In a world where software is king, taking advantage of the benefits software monetization has to offer can be key for businesses looking to navigate their way through. However, it is important that organizations ensure they’ve followed the right steps, instead of diving straight in. Those that do, can give themselves a strong base to move forward.
Jamie Longmuir, Regional Sales Director, UK/BeNeLux/Nordics, Thales