Digitally Native Revenue Models
Digitally native organizations are those that have existed from their inception primarily in the digital world, and that typically engage with customers and deliver their products or services via a digital interaction. Well-known examples include Netflix in the consumer market or Salesforce in the business arena, but no matter the end customer, a key attribute of these businesses is that they predominately generate revenue via subscriptions. And notably, the difference between traditional subscription models like magazines or the old Colombia House music service and modern subscription models is that the product or service offering can be expanded, cancelled, extended or modified on demand and is priced as part of a digital engagement.
Digitally native organizations have demonstrated the advantages of these revenue models. For instance, they provide a more predictable revenue stream, since existing subscribers provide a forecastable baseline, and they enable continuous engagement with the customer to ensure adoption and usage as well as providing opportunities to cross-sell, up-sell and recruit new customers through referrals. Accordingly, many traditional businesses are now examining ways to incorporate subscription mechanisms into their revenue mix. We assert that by 2025, over one-fifth of organizations will have part of their business conducted via subscriptions and recurring revenue rather than one-time sales as companies adjust business models to remain competitive.