June 19 by Gene Eun

In a recent post on the Apttus Blog, Brion Schweers (GM, Apttus Quote-to-Cash) discussed the challenge of selling in the modern digital service economy and how it is requiring today’s enterprises to evolve their Quote-to-Cash processes in response to the shift from a “manufacturing economy” to a “service economy”. Today’s Fortune 500 list contains more services businesses than ever before and the number that offer products through a subscription model, usage-based model, or “anything-as-a-service” model, is rapidly rising. In fact, Apttus estimates that more than 90% of B2B companies sell subscription products or services along with their core offerings.

As Brion explained, the next generation of Configure Price Quote (CPQ) customers need a Full-Spectrum CPQ solution to more effectively sell subscription products in today’s service economy. By automating the CPQ process, businesses can optimize revenue yield by gaining control over product/service bundles, discount thresholds, approval workflows, and more. While increased control is critical, using artificial intelligence (AI) to analyze historical data and receive actionable insights can be an even more powerful tool for growing a subscription business. However, with all the talk about using AI within the enterprise, it’s still hard to separate signal from the noise.

To help filter out the noise, here are 4 ways enterprises can leverage AI to grow their subscription businesses:

Uncover Hidden Sales Opportunities with AI

service economyFinding and obtaining new customers is often the top priority for a growing business. Expanding the customer base is essential for subscription-based businesses that want to thrive in today’s service economy. While most enterprises use traditional market research and analysis to determine which prospects have the greatest propensity to buy, very few have begun to leverage the AI technologies to identify potential target customers. By analyzing historical sales data, AI can recognize previously undetected buying patterns to determine which prospects are most likely to buy services and guide sellers accordingly. For example, a manufacturer of industrial-grade power generators has sold maintenance contracts to a high percentage of its public-sector customers who have bought its diesel generators. When selling diesel generators to public sector customers, their quotes in Apttus CPQ automatically include maintenance contracts which is leading to a steady increase is service revenue created by this key part of their business.

Using AI to Reduce Customer Churn

With any subscription-based business, minimizing customer turnover or “churn” is essential to growing the Recurring Monthly Revenue (RMR). Banks, internet service providers, insurance companies, and telephone service providers often use customer turnover rates as a key business metric, along with cash flow, EBIDTA, gross margin, etc. Using AI, businesses can predict customer turnover by assessing their propensity of risk to churn. With machine learning, they can analyze in real-time, the factors associated with customer attrition such as service underutilization or customer satisfaction issues. This is why many companies are offering subscriptions and usage-based services – because analyzing the usage data helps companies better know their customers. By identifying a small prioritized list of potential defectors, they can focus customer retention programs on the customers most at-risk of turnover and directly impact their RMR and bottom line.

 

Maximizing Renewal Rates with AI

Maintaining high renewal rates of subscription services is an imperative to growing RMR over time. Using AI, businesses can proactively notify sellers (or renewals specialists) and initiate the renewal process based on like customers’ renewal histories. Beyond notifications and initiating the renewals process, AI can also provide sellers with timely next steps that ensure best practices are used throughout the renewals process. Subscription business models can mean a more dynamic relationship with your customer, since they may upgrade/add users/swap services over time, a snapshot of what they are using in year three of the contract looks different than year one. So don’t propose a renewal based simply on year one. Leverage AI to consider the current state of the customer, and compare them to recently on-boarded customers to propose a more market-current renewal configuration. Consider leveraging AI to find patterns in customer renewal data to maximize service renewals by your existing customers.

Leveraging AI to Cross-Sell & Up-Sell

AI can also help identify opportunities to cross-sell and up-sell subscription services to your existing customer base. For example, customers with a data plan tied to their mobile phone service often have limits to the amount of data they can access per month. With AI, customer service representatives can be prompted to guide customers to data plans with higher data limits or unlimited data plans that save customers money in the long run by avoiding costly overage charges. Similarly, AI can be incorporated into digital commerce portals to increase cross-sell and up-sell benefits to maximize customers’ self-service buying experience.

 

The service economy in not going away anytime soon. In fact, the percentage of enterprises offering products through a subscription model only seems to be growing. It’s more important than ever that businesses modernize their processes and evolve to adopt new technology to compete more effectively and sustain growth. The use of AI can not only help grow subscription-based businesses, it can help them thrive.

Learn more about the impact of AI on revenue generation in Harvard Business Review’s report Artificial Intelligence for Maximizing Revenue.

 

Apttus Billing & Subscription Management enables you to grow revenue through blended business models. Learn more by downloading the Datasheet.

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