Zuora’s Subscribed Institute Welcomes Boston Consulting Group to the Think Tank

Rhea-AI Summary

Zuora, Inc. (NYSE: ZUO), a leader in subscription management, has collaborated with Boston Consulting Group and the Subscribed Institute on a study emphasizing the importance of existing customer revenue in subscription businesses. The research reveals that 70-80% of revenue should originate from current customers to drive growth. Key findings indicate that companies focusing on this 'land and expand' strategy can achieve nearly double the annual recurring revenue (ARR) growth compared to traditional firms, alongside a 30% higher ARR.

Positive

• Companies with 70-80% of revenue from existing customers can achieve nearly 2X ARR growth compared to traditional businesses.
• SaaS companies show a 30% higher ARR than non-SaaS companies by effectively providing ongoing value to existing customers.
• Businesses with over $100 million in ARR outperform those with less than $10 million by +14% in overall growth and +12% in average net expansion.

Negative

• None.

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.”

Download the report here for best practices to improve your company’s Land and Expand approach in today’s Subscription Economy. Pineda and Konary are also published by the World Economic Forum.

For more information, contact the Subscribed Institute at:
https://www.subscribed.com/subscribed-institute

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.

© 2021 Zuora, Inc. All Rights Reserved. Zuora is a trademark or registered trademark of Zuora, Inc. Third party trademarks mentioned above are owned by their respective companies.

About Boston Consulting Group

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact.

To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.

SOURCE: Zuora Financial

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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

View source version on businesswire.com: https://www.businesswire.com/news/home/20210406005149/en/

FAQ

What did Zuora announce regarding subscription businesses?

Zuora announced a joint research study highlighting that 70-80% of revenue in subscription businesses should come from existing customers to optimize growth.

What is the significance of the 'land and expand' strategy according to Zuora's report?

The 'land and expand' strategy significantly enhances annual recurring revenue, allowing companies to achieve nearly double the growth compared to traditional models.

How much higher is the ARR for SaaS companies over non-SaaS companies?

SaaS companies have a 30% higher annual recurring revenue compared to non-SaaS companies, according to the research.

What are the key findings related to ARR for companies with different revenue scales?

Companies with over $100 million in ARR outperform those with less than $10 million in ARR by +14% in overall growth.

Who collaborated with Zuora on this research?

Zuora collaborated with Boston Consulting Group and the Subscribed Institute on this research.