# How Financial Metrics can Drive the Subscriber Experience 
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-11-25
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Why Subscription Finance is Key to Modern Business Success
Meta Description: Discover how the Subscription Economy is changing consumer behaviour and the role of finance departments in delivering seamless subscriber experiences.
URL: https://financedigest.com/how-financial-metrics-can-drive-the-subscriber-experiencehtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/untitled-design-2020-11-25t184142-1736838701226-compressed.jpg)

_By **John Phillips,** General Manager, EMEA at_ [_Zuora_](https://www.zuora.com/)

Today’s pandemic has accelerated a global trend that was already well underway when it comes to consumer buying behaviours: the end of ownership. In fact, [according to research undertaken by Harris Poll](https://www.zuora.com/resource/the-end-of-ownership/), 74% of adults believe that in the future they will own fewer physical goods, choosing instead to turn to subscription services.

Whether it’s television streaming services or recipe box providers, as individuals experienced huge changes to routine and behaviour, the use of subscription models increased. As a result, we’re witnessing an acceleration in the growth of what we refer to as Subscription Economy, an era defined by the broad preference for access to subscription services over the ownership of traditional products.

Yet, [businesses with these models](https://www.financedigest.com/apis-open-banking-and-new-business-models.html "APIs, Open Banking and New Business Models") in place cannot afford to become complacent. [Customer expectations](https://www.financedigest.com/banking-from-anywhere-embracing-technology-to-exceed-customer-expectations.html "Banking from anywhere: embracing technology to exceed customer expectations") continue to rapidly evolve. In order to continue to prosper during challenging times, organisations in every sector need to be agile in order to deliver the seamless, personalised subscriber [experiences that will enable them to not only stand out from the crowd and appeal to new customers](https://www.financedigest.com/why-transforming-the-back-office-is-key-to-customer-experience-success-in-financial-services.html "Why Transforming the Back-Office is Key to Customer Experience Success in Financial Services"), but also encourage long-term loyalty. This is where the finance department comes in.

**The** [modern CFO](https://www.financedigest.com/who-is-the-modern-day-cfo.html "WHO IS THE MODERN DAY CFO?")

The remit of today’s modern CFO stretches far beyond balancing the books and [managing budget spreadsheets](https://www.financedigest.com/goodbye-excel-spreadsheets-hello-performance-management-tools.html "Goodbye excel spreadsheets, hello performance management tools"). New technology, namely automation, along with market uncertainty amid the current pandemic, has ushered in the [modern finance](https://www.financedigest.com/why-do-modern-finance-functions-strive-for-automation.html "WHY DO MODERN FINANCE FUNCTIONS STRIVE FOR AUTOMATION?") era.

In fact, our recent [State of Finance Amid COVID-19](https://www.zuora.com/resource/state-of-finance-amid-covid-19/) report found 80% of finance professionals have been very or somewhat involved in their company’s internal and external response to today’s pandemic. With the help of modern technologies – such as subscription billing software – finance leaders can serve as strategic advisors, helping to make [critical business](https://www.financedigest.com/marketing-communications-is-a-business-critical-pillar-now-and-in-a-post-pandemic-future.html "Marketing Communications is a business-critical pillar now – and in a post pandemic future") decisions.

One area in which [finance should be playing a key role](https://www.financedigest.com/whose-role-is-it-anyway-why-finance-underpins-data-led-digital-transformation.html "Whose role is it anyway? Why finance underpins data-led digital transformation") is subscriber experiences. For example, with the rise of the Subscription Economy, the recurring bill has become a new [way for businesses](https://www.financedigest.com/five-ways-businesses-can-prepare-themselves-for-the-digital-economy-be-kaler-pilgrim.html "Five ways businesses can prepare themselves for the digital economy – Be Kaler Pilgrim") to glean insights around changing consumer needs and behaviours. When used in the right way, these insights can help [businesses to add true value to their services](https://www.financedigest.com/more-companies-investing-heavily-in-business-services-software.html "More Companies Investing Heavily In Business Services Software").

Whilst many companies regularly [spend millions on front-end initiatives such as product-focused marketing and social media campaigns, the most successful subscription businesses are focused on backend technologies and processes, which not only serve as a foundation for agility and scale, but offer critical insights to end user](https://www.financedigest.com/industrial-gauges-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Industrial Gauges Market Competitive Growth Strategies Based on Type, Applications, End User and Region") usage and preferences.

By failing to take into consideration back-end subscription [finance processes and insights as a part of the decision-making](https://www.financedigest.com/gary-mcgaghey-explains-how-cfos-can-strengthen-decision-making-processes-and-reimagine-the-finance-model.html "Gary McGaghey Explains How CFOs Can Strengthen Decision-Making Processes and Reimagine the Finance Model") process, many businesses are missing a mark when it comes to elevating the subscriber experience.

![John Phillips](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/john-philips-1-scaled-e1606310036278-1736838701390-compressed.jpg)

John Phillips

For example, in subscription-based models, a [company’s revenue](https://www.financedigest.com/mldw-technology-market-size-share-top-leading-companies-consumption-drivers-trends-forces-analysis-revenue-challenges-and-global-forecast-2028.html "MLDW Technology Market: Size, Share, Top Leading Companies, Consumption, Drivers, Trends, Forces Analysis, Revenue, Challenges And Global Forecast 2028") stream could act as a great indicator of whether the subscriber experience strategies being implemented are having the desired impact. Whether it’s upgrades, downgrades, suspensions or resumes, revenue is always changing. A [subscription model](https://www.financedigest.com/the-rise-of-the-subscription-model.html "The rise of the subscription model") enables you to track it more effectively. By analysing [revenue trends](https://www.financedigest.com/gynaecological-cancer-drugs-market-global-leading-companies-analysis-revenue-trends-and-forecasts-2027.html "Gynaecological Cancer Drugs Market Global Leading Companies Analysis, Revenue, Trends and Forecasts 2027"), an organisation can build a better picture of who their target customer is and what they want in a brand.

As such, when accessed in real-time, customer usage data gleaned from finance subscriptions could lay the groundwork for some [important organisational changes](https://www.financedigest.com/popcorn-containers-market-important-changes-in-industry-dynamics-during-2017-2027.html "Popcorn Containers Market  Important Changes in Industry Dynamics during 2017-2027") – whether that’s implementing new services or changes to product pricing. In our current climate of uncertainty, unlocking the right [revenue insights](https://www.financedigest.com/acth-deficiency-treatment-market-in-depth-insights-revenue-details-regional-analysis-by-2026.html "ACTH Deficiency Treatment Market In-depth Insights, Revenue Details, Regional Analysis by 2026") quickly and acting upon them could be the difference between a business succeeding or failing.

**The winning metrics**

Whilst businesses with a subscription model in place are gifted with a wealth of customer data, this data means nothing if it cannot be used to derive actionable insights and [drive growth](https://www.financedigest.com/how-embedded-insurance-can-drive-growth-and-value-for-the-insurance-and-finance-sectors.html "How Embedded Insurance Can Drive Growth and Value for the Insurance and Finance Sectors"). In order to ensure that progress is tracked accordingly, there needs to be a verified set of metrics in place.

As subscriptions are forward looking and often form over the life of a customer, traditional Generally Accepted Accounting Principles (GAAP) practice can’t measure their true value. Therefore, a new set of metrics is needed which should include:

·       **Net Annual Recurring Revenue Changes –** [According to the Subscribed Institute](https://www.zuora.com/guides/subscription-metrics-arr-tcv/) – a dedicated think tank focused on the most critical business problems of the Subscription Economy – recurring revenue is the single most important metric for any subscription business. It’s important to monitor recurring [revenue changes across](https://www.financedigest.com/white-bullets-piracy-demonetising-programmes-drastically-reduce-ad-revenues-to-piracy-websites-across-europe-analysis-finds.html "White Bullet’s piracy demonetising programmes drastically reduce ad revenues to piracy websites across Europe, analysis finds") the following categories: new, contraction, expansion, and churn. Then, factor in discount charges to get a complete picture of the transactions [driving growth in your business](https://www.financedigest.com/covid-19-is-impacting-the-variable-speed-drive-market-size-business-revenue-forecast-leading-competitors-and-growth-trends-2028.html "COVID-19 Is Impacting The Variable Speed Drive Market | Size, Business Revenue Forecast, Leading Competitors And Growth Trends 2028").

·       **Net retention rate –** or a company’s ability to [manage risk](https://www.financedigest.com/extended-reality-applications-in-risk-management.html "Extended Reality Applications in Risk Management") whilst remaining profitable – is another helpful tool. Zuora recently studied [data from 17 public companies](https://www.zuora.com/guides/net-retention-game-changed/) to identify what there is to learn about retention from today’s leading subscription companies. The key finding was that median net retention stands at 100 percent, meaning that the median [company gains at least as much recurring revenue](https://www.financedigest.com/multigrain-bread-mix-market-size-share-top-leading-companies-consumption-drivers-trends-forces-analysis-revenue-challenges-and-global-forecast-2029.html "Multigrain Bread Mix Market: Size, Share, Top Leading Companies, Consumption, Drivers, Trends, Forces Analysis, Revenue, Challenges And Global Forecast 2029") as it loses from each cohort of customers over time. Yet, the top half of companies in net retention grow at [nearly](https://www.financedigest.com/meta-to-take-nearly-half-of-sales-made-by-its-metaverse-creators-as-fees.html "Meta to take nearly half of sales made by its metaverse creators as fees") twice the rate of companies in the bottom half. Therefore, we can probably conclude that net retention is one of the key [ways in which hyper-growth companies become](https://www.financedigest.com/intuitive-decision-making-could-this-approach-be-the-most-underrated-way-to-becoming-a-successful-leader.html "Intuitive decision making: could this approach be the most underrated way to becoming a successful leader?") hyper-growth companies.

·       **Recurring-to-consumption billing ratio –** Zuora’s Subscribed Institute found companies leveraging a combination of recurring and usage pricing [grew 30% faster](https://www.zuora.com/guides/drive-growth-usage-based-pricing/) than those who don’t have usage pricing. In order to make this metric a success, organisations will need to monitor and [identify areas](https://www.financedigest.com/identifying-areas-of-vulnerability-why-cybersecurity-shouldnt-be-an-afterthought-for-financial-organisations.html "Identifying areas of vulnerability: Why cybersecurity shouldn’t be an afterthought for financial organisations") to consider utilising usage-based pricing.

In today’s uncertain landscape, [customer loyalty](https://www.financedigest.com/the-problem-with-measuring-customer-loyalty-and-how-to-overcome-it.html "The problem with measuring customer loyalty; and how to overcome it") has never been more important. It has also never been harder to achieve. Being able to keep up with changing consumer behaviours and implementing the right [customer experience](https://www.financedigest.com/solving-the-customer-experience-conundrum-how-fs-organisations-can-use-data-to-level-up.html "Solving the customer experience conundrum: How FS organisations can use data to level up") initiatives at the right time could be the difference between your business remaining profitable or collapsing. The insights around [consumer spending](https://www.financedigest.com/cost-of-living-crisis-consumers-keep-spending-for-now.html "Cost of living crisis? Consumers keep spending for now") that finance subscription models provide could prove an invaluable asset, enabling you to future-proof your business no matter what lies around the corner.


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---