The Value of Collecting Software Usage Data: Stop Guessing & Start Knowing
Over the past few years, manufacturers and large industrial groups have complemented their offers with state-of-art software products. Companies like Siemens, Honeywell, Wartsila, Boeing, GE, Thales and others, generate a large part of their revenues from software offerings. For example, people know Siemens as a very large industrial group. But did you know that Siemens’s digital factory generates 15 billion euros per year in software sales? The types of software that these firms commercialize include large enterprise software like engineering management software or industry-specific platform solutions. Other software solutions can include simple data visualization, asset tracking, predictive maintenance, CAD design or inventory management. At the same time, the XaaS new business and pricing models have taken markets by storm. XaaS is the most talked about business model as it allows customers to purchase things based on variable or consumption metrics.
In the pure software space, experts claim that, today, over 70% of purchased software is done with a SaaS model (software-as-a-service). For industrial and manufacturing companies, that transition to SaaS is starting and that transition from on-premise perpetual license to in-the-cloud SaaS model is not an easy one. The payback of such change in go-to-market model is that it offers tremendous opportunity to learn from customers as long as you can capture customers’ usage data.
Value and pricing experts will make a strong case for conducting customer research before launching of your solutions in order to predict usage and to develop customer-centric pricing packages. This is for sure a necessity. But it does not stop once the product is launched. Monetizing your software includes managing your software supply chain (read more here: https://sentinel.gemalto.com/software-monetization/what-is-software-monetization/ )That includes tracking how your software is being used! Tracking software usage data post launch while you scale offers great benefits. It is all about stopping to guess and starting to know how customers use your product. This is a gold mine of information that enables data driven decisions for your go-to-market approach and your software product roadmap.
Here are ten benefits of capturing software usage data from your customers.
1. Billing and collecting usage-based pricing fees
This might be the heart of your SaaS pricing model and you need to get paid based on transparent and tracked usage. And if you have performance/revenue sharing agreement with trade partners based on usage, it is a critical requirement. The metering, billing, and collecting of your software usage needs to be dynamic and automated.
2. Developing next generation of product features
Customer usage trends and patterns can help introduce new software features and repackage existing ones. Customer data also feeds your hardware/product roadmap and allows you to version more dynamically.
3. Upselling the most used features quickly after launch
You might have done the best customer research pre-launch but surprises still happen after you launch. It might be the case that you misread the attractiveness of features or packages for all customers or for a segment of customers. Understanding this quickly allows you to react and repackage your options. It might also create an opportunity to upsell portion of your customers based on peer behavior.
4. Killing the least used features and simplifying the experience
We always have a tendency to give customers more than they ask for. A good/better/best approach helps reduce the risk of over-engineering the offer to everyone. Tracking usage helps identifying the ignored or less used features and making intelligent decisions about them. Focusing on what delights customers allow you to cut cost and reduce maintenance expenses.
5. Building the next evolution of your usage pricing packages (i.e. triggers and volumes in your buckets)
Experts in consumption-based pricing will recommend adjusting prices two or three times per year if possible and practical. As your customer base scales and uses more of your products, they also expect packages to changes based on their consumptions. The whole benefit of usage-based pricing is to encourage your users to use more.
6. Identifying value of potential misuses or unintended uses
Product misuses are the unexpected ways the customers use your product. Maybe they use a feature to achieve another outcome in their daily operation or to produce reports they need. Uncovering these nuggets via usage tracking allows you to turn the unintended into valued features.
7. Adapting and matching your customer segmentation to usage data
Knowing more about your customer through dynamic usage data helps you optimize your segmentation models. You can then start designing usage packaging and hardware/software bundles by segments, regions, market verticals, and end-use applications. So for example, you could start with a good/better/best pricing strategy and then add functional optional packages by regions or functional users.
8. Tracking usage trends and changes in consumption in the value chains
Sometimes your customers might not be aware of their usage trends. The beauty of aligning value metric across the value chain is to be able to detect and anticipate peaks and drops in usage due to exogenous factors. Then it is all about reacting and adapting the product very quickly. And your customers might be grateful if you can give them a heads up!
9. Evolving your strategic product/software roadmap
Software products survive over time when they create sustainable value. That includes improved customer experience, superior customer value, and a focus on what really matters to customers. In our industrial space, it is a frequently asked question: how is your system roadmap progressing over time? Is your platform going to be evolving and will it be relevant 5 years from now?
10. Benchmarking and dash-boarding peer customer usage data
This is one of the great advantages of capturing usage behaviors, trends, and patterns. Each user can be benchmarked against peers in their industries as long as enough of them participate. For you, it creates an opportunity to create user communities and establish your thought leadership in the space.
The reality is that it might be hard to convince customers to share usage data. The longer you wait to ask, the more difficult it might get. Give them an incentive to share data. Reward them directly and promise them cost optimization along the software lifecycle. Make it a win-win proposition by offering rewards, better solutions in the future, and more financial value.
Generally speaking, pure SaaS players have taken usage data tracking very seriously. More of them have purchased the right metering and entitlement software to track usage. This may be less of a case with manufacturing companies that offer lots of software products along with their main products. I would strongly encourage them to start planning for more software sales as part of their overall offering and to invest in the right tools to make sure they can automate the management of their software solutions. The trend towards SaaS and PaaS is here to stay and consumption/usage-based models are increasingly popular. So it is time to get ready and start thinking about the future!
About the Author
Stephan M. Liozu, Ph.D. (www.stephanliou.com) is a Chief Value Officer at Thales Group and a founder of Value Innoruption Advisors, a consulting boutique specializing in value-based pricing, digital pricing, and industrial pricing. He is also an Adjunct Professor and Research Fellow at Case Western Reserve University. He is the author of nine pricing books and is a frequent keynote speaker at industrial, pricing, and digital conferences.0