Zuora, Inc., (NYSE:ZUO) the leading cloud-based subscription management platform provider, today released the latest edition of its biannual Subscription Economy Index™ (SEI) designed to measure the collective health and growth of subscription businesses. For the first time since its inception in January 2012, the SEI analyzed the impact of subscription businesses by sector, comparing subscription businesses in Software as a Service (SaaS), Internet of Things (IoT), Manufacturing, Publishing, Media, Telecommunications and Business Services to their respective S&P 500 Industry benchmarks.
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Overall, the SEI data reveals that subscription businesses grew revenues about 5 times faster than S&P 500 company revenues (18.2% versus 3.6%) and U.S. retail sales (18.2% versus 3.7%) from January 1, 2012 to June 30, 2019. (Graphic: Business Wire)
Over the past seven and one half years, the Subscription Economy® has continued to thrive, growing more than 350 percent, as consumers increasingly demand access to convenient, digital services over the ownership of physical products. In fact, IDC predicts that by 2020, 50 percent of the world’s largest enterprises will see the majority of their business depends on their ability to create digitally enhanced products, services, and experiences.
The latest SEI report showcases a number of industries contributing to this incredible growth. On average, Zuora found that the sectors outlined in the SEI report are growing 2 to 5 times faster than their industry benchmarks.
“The Subscription Economy is not limited to one or two industries. We’re now seeing sectors far and wide placing subscriptions, over pure-play products, at the center of their businesses to achieve rapid and sustained long-term growth,” said Dr. Carl Gold, Chief Data Scientist at Zuora. “The SEI report showcases the transition to subscriptions beyond the boundaries of traditional SaaS organizations into the Manufacturing and Business Services sectors, exposing the phenomenal value of the subscription business model in today’s digital age.”
Key industry findings from the SEI report which support the Subscription Economy’s long-term magnitude and viability in various industries include:
- Business services and manufacturing industries experienced the lowest churn rates across all sectors, with 16.2% and 20.4% churn rates, respectively. However, Media (37.1%) and Publishing (28.2%) industries saw the highest amount of churn.
- IoT and manufacturing subscription companies exceeded their industry S&P 500 benchmarks by more than 5X. IoT subscription businesses also achieved the highest annual growth rate of Average Revenue Per Account (ARPA) at 14.3%, more than 2x the SEI average of 6.5%.
- The publishing industry generated the least amount of revenue from usage-based pricing compared to other industries at 17%, while the sector with the highest percentage of usage-based revenue was Business Services (57%).
Overarching Subscription Economy insights derived from these industry findings include:
- Offering subscriptions that serve business-critical functions experience lower customer churn. According to Dr. Gold, “Lower churn could be attributed to the ‘sticky’ nature of B2B subscriptions, which serve mission-critical functions and tend to be deeply embedded within a business’ operations. It could also indicate that new entrants shifting to subscriptions are learning from first-movers to the business model.”
- Launching and monetizing new services drive greater individual account growth. According to Dr. Gold, “Add-on and up-sell opportunities inherent in digital services and connected hardware support high ARPA growth rates.”
- Incorporating usage-based pricing facilitates lower churn and higher overall subscription growth. According to Dr. Gold, “Companies in industries like publishing that do not adopt usage billing generally have higher churn than companies like those in SaaS or Business Services that do. This suggests that the balance and flexibility of usage-based pricing plays a useful role in customer engagement and retention.”
Download the full Subscription Economy Index™ (SEI) report here for more information on Subscription Revenue Growth, Churn Rate, Customer Base Growth Rate, Average Revenue Per Account Growth Rate, Usage Based Revenue, and Electronic Payments by Industry (SaaS, IoT, Manufacturing, Publishing, Media, Telecommunications, Business Services) and Region (EMEA, North America, APAC).
About Zuora, Inc.
Zuora provides the leading cloud-based subscription management platform that functions as a system of record for subscription businesses across all industries. Powering the Subscription Economy®, the Zuora platform was architected specifically for dynamic, recurring subscription business models and acts as an intelligent subscription management hub that automates and orchestrates the entire subscription order-to-cash process, including billing and revenue recognition. Zuora serves more than 1,000 companies around the world, including Box, Rogers, Schneider Electric, Xplornet and Zendesk. Headquartered in the Silicon Valley, Zuora also operates offices around the world in the U.S., EMEA and APAC. To learn more about the Zuora platform, please visit www.zuora.com.
This press release and report contains forward-looking statements that involve a number of risks, uncertainties and assumptions, including but not limited to statements regarding the expected growth and trends in digitally enhanced products and the subscription e-commerce market. Any statements that are not statements of historical fact may be deemed to be forward-looking statements, and actual results could differ materially from those stated or implied in forward-looking statements. This report also includes market data and certain other statistical information and estimates from industry analysts and/or market research firms. Zuora believes these third party reports to be reputable, but has not independently verified the underlying data sources, methodologies or assumptions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information.
© 2019 Zuora, Inc. All Rights Reserved. Zuora, Subscription Economy Index and Powering the Subscription Economy, are trademarks or registered trademarks of Zuora, Inc. Other names and brands may be claimed as the property of others. Nothing in this press release should be construed to the contrary, or as an approval, endorsement or sponsorship by any third parties of Zuora, Inc. or any aspect of this press release.
SOURCE: Zuora Financial