Zuora, Inc., (NYSE:ZUO) the leading subscription management platform provider, today announced its joint research with Boston Consulting Group (BCG) in collaboration with the Subscribed Institute, Zuora’s think tank for the Subscription Economy®. BCG joins the Institute’s growing ecosystem of partners, academics, and practitioners, focused on solving the challenges and unlocking opportunities to help subscription companies succeed.
The newest research1 from BCG and the Subscribed Institute suggests that 70-80% of the revenue of a successful subscription business should come from existing customers to optimize growth. However, many companies often fall short of monetizing those relationships, according to the report, “How to Nail the “Land and Expand” Model to Drive Subscription Growth.”
Co-author and pricing expert John Pineda, Partner and Director at BCG said, “Freemium models are useful for customer acquisition and expansion, but not for generating actual revenue growth. Technology companies that focus on landing a bunch of new accounts, without taking care of them will end up losing customers, as well as the incredible growth they represent. Pricing to value is key to improving core business profitability– and the subscription model makes it easy.”
The report explores the direct correlation between the “land and expand” strategy and annual recurring revenue, by comparing non-subscription to subscription-based technology companies. Findings suggest that businesses with 70-80% of revenue coming from existing customers can achieve:
- Nearly 2X Annual Recurring Revenue (ARR) Growth. When compared to traditional Hardware and Software companies, enterprise SaaS companies consistently focus on the expansion of revenue across four critical dimensions: upselling, cross-selling, growing volume, and capturing price increases.
- 30% Higher ARR. SaaS companies are stronger than non-SaaS companies at escaping the “leaky bucket” trap with a stronger investment in providing ongoing value to existing customers.
- Bigger Upsell Opportunity. For SaaS companies, land, expand, and retain performance improves with increase in ARR. Companies with more than $100 million in ARR consistently outperformed companies with less than $10 million in ARR in overall growth (+14%), average net expansion (+12%), upsell revenue expansion (+10%), new customer growth (+2%), and churn (3% lower).
“As-a-service business models are the future of economic growth,” said Amy Konary, Founder and Chair, the Subscribed Institute at Zuora and former IDC analyst for digital business models of nearly 20 years. “We’re thrilled to partner with BCG to continue providing the world with the leading research and expertise on subscription strategy and monetization.”
For more information, contact the Subscribed Institute at:
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-revenue process seamlessly across billing and revenue recognition. Zuora serves more than 1,000 companies around the world, including Box, Ford, Penske Media Corporation, Schneider Electric, Siemens, Xplornet, and Zoom. Headquartered in 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.
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About Boston Consulting Group
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SOURCE: Zuora Financial
1How to Nail the “Land and Expand” Model to Drive Subscription Growth, Boston Consulting Group (BCG)’s Value Science team and Subscribed Institute, March 2021