Subscription businesses face revenue leakage, with losses ranging from 4 per cent to 25 per cent. With the market projected at $1.5 trillion, this could result in over $60 billion in losses.
In the grand theater of subscription businesses, revenue leakage is the phantom lurking in the shadows, silently draining the coffers while everyone on stage is too busy singing their own praises to notice. This isn't just a leak; it's a full-blown, yet stealthy, waterfall that everyone pretends not to hear.
As per the analyst friends, every growing subscription business experiences some form of revenue leakage ranging from 4 per cent to 25 per cent and more depending the size of the organisation. Given that the subscription market is expected to be over $1.5 trillion in next couple of years, we are looking at the revenue leakage to range anywhere between $60 billion and more. Now that I have your attention, let us see a few examples of how revenue leakage can occur in a subscription business.
• Inaccurate billing
• Failed payment transaction
• Discounts and promotions
• Underutilised licenses
Well, there are over a 100 reasons why the leaks happen. But it’s not the reasons that are concerning. It’s the denial that the leakage exists that’s concerning, even more so the lack of ownership.
Let's talk about the starring roles in this play of denial: the CRO, CIO, and CFO, each playing their part in this drama of dollars disappearing down the drain.
The Chief Revenue Officer (CRO): The Eternal Optimist
First up, we have the CRO, the captain of commerce, the duke of deals. So focused on conquering new revenues, they often overlook the treasure slipping through the cracks back home. It's like throwing a lavish party to celebrate the harvest while the barn door is wide open, and the grains are blowing away. "Look at all the new customers!" they exclaim, while existing revenue streams quietly evaporate like morning dew.
The Chief Information Officer (CIO): The Tech Titan in Tunnels
Next, enter the CIO, the wizard of the web, the oracle of IT. Their domain is the digital depths, where old systems lurk like forgotten Gods, occasionally swallowing whole chunks of revenue in arcane rituals. The CIO is too busy chasing the next shiny tech trend, conjuring clouds and coding the future. Meanwhile, the legacy systems, feeling neglected, sulk in the corner, leaking revenue like a sieve.
The Chief Financial Officer (CFO): The Guardian of the Gold (Or So They Think)
And then there's the CFO, the master of the mint, the sentinel of the spreadsheet. You'd think they'd be the first to notice the money mysteriously melting away. Yet, they're often so high up in their ivory tower, counting stars, that they fail to see the cracks in the foundation. They might crunch numbers like a champion, but when it comes to plugging leaks, they're using a spreadsheet to catch rainwater.
Why the Denial? The Collective Shrug
The reasons for this collective shrug at the sight of revenue leakage are as varied as they are vexing:
Complexity in the Subscription Models: Subscription models are as intricate as a royal family tree, with pricing tiers, bundles, and promotions intertwined in a delicate dance. It's so bewildering that when you try to trace where the revenue leaks are, you might as well be trying to solve a Rubik's Cube in the dark.
Invisibility Cloak Engaged: Without the right tools, seeing revenue leakage is like trying to spot a chameleon in a jungle. It's there, but good luck pinpointing it.
Misaligned Stars: Each department has its telescope pointed at a different constellation. The CRO looks for new stars, the CIO is busy with starships, and the CFO is counting them. Nobody is looking at the black hole swallowing them whole.
Silos, Not Just for Farmers: When departments are more isolated than desert islands, it's no wonder that collective action against revenue leakage is as rare as rain in the Sahara.
In the end, stopping the revenue leak is a bit like a game of hot potato. Nobody wants to hold it for too long. But here's the twist: it's a team sport.
The CRO needs to don their detective hat and see beyond the new horizons, ensuring that the treasure chest isn't just filling up but also staying full.
The CIO should channel their inner plumber, patching up the old pipes while also laying down new, leak-proof ones.
The CFO ought to get down from the tower, roll up their sleeves, and lead the charge against the invisible enemy, armed with a ledger in one hand and a caulk gun in the other.
It takes a village to raise a child, and it takes an entire company to plug revenue leaks. From the C-suite to the ground troops, everyone needs to join the hunt for the elusive leaks, turning denial into action, and transforming that action into a watertight revenue stream. After all, a penny saved is a penny earned, but a penny recovered from the depths of revenue leakage? That's a victory march waiting to happen.
Authored by Kiran Mohan, Vice President of Marketing, xfactrs