How Increasing Popularity of Subscription-Based Business Models Will Impact the Channel Partner Community

By Nancy Teixeira

Nancy Teixeira

Rapidly changing buying behaviors spurred by the pandemic have disrupted traditional partner relationships. Over two years later, it remains an opportune time to re-evaluate business opportunities, particularly pricing structures.

Subscription models such as Netflix and Adobe Creative Cloud have proven so successful in the consumer world that B2B businesses have taken notice. The Subscription Economy Index, which tracks the subscription economy, found that subscription businesses had 11.6% revenue growth, while revenue of nonsubscription-based peers declined in 2020.

Subscription-based business models are becoming increasingly popular, so how can the partner community evolve to meet this trend, especially given that these models can be challenging to implement? From streamlining the billing process to developing strong relationships across the channel, it’s time for the channel to figure out how to overcome these challenges and focus on implementing subscription-based pricing structures.

Rethinking the Business Model

Gaining buy-in to this new pricing model can be tricky because it requires a realignment of traditional business models away from the on-premises sales model. Switching from a perpetual license to a subscription model changes the sales cycle. The long-term vision shows that subscription models can be more profitable. Still, in the short-term, channel partners must switch from making one big initial sale to keeping customers happy over an extended period to ensure they keep their subscription.

To ensure the subscription-based model works, businesses must shift their mindset from accepting customer churn to being dedicated to making sure new customers find immediate value and support within their ecosystem. This shift can be difficult because it requires upending long-established business practices, but investing in this transformation will empower channel partners to create a business model that will set them up for future success.

Connecting with customers when it’s time to sell doesn’t work with subscription businesses. Instead, the sales and marketing relationship must be ongoing. The sales trajectory becomes one of perpetual touchpoints, with the sales team regularly checking in to make sure their solutions are meeting their customers’ needs. Instead of making the one big sale, it becomes about excellent, long-term customer relationships and constantly working to better fulfill customer needs, such as by selling additional services or features that make their lives easier.

Ultimately, with the increasing popularity of subscription-based business models over traditional channel arrangements, channel partners will need to be ready to move rapidly to new ways of doing business over the coming year. COVID-19 upped the need for companies to be highly agile, which often means upending tradition.

This reimagined partner model that focuses on incorporating subscription-based pricing structures will require fundamental change with everything from the sales-customer relationship to the backend processes that the business relies on. But those channel partners that do move forward with this tide toward the subscription model will help to future-proof their business by putting their customers’ wants and needs first.

Nancy Teixeira is senior vice president of partner strategy and sales at Sage North America, where she leads its channel organization for North America. She has a demonstrated record of achievement in sales, marketing and channel management for midmarket ERP and CRM software and is passionate about technology and how it enables people to achieve their full potential. You may follow her on LinkedIn and @SageUSAmerica or @nancytex on Twitter.