The SEI report: Key insights to drive recurring growth strategies

Even in an uncertain market with increasingly stiff competition, companies in the Subscription Economy IndexTM (SEI) report found opportunities for recurring growth. By tapping into a plethora of innovative business models, these businesses have the ability to adapt and align their monetization in step with—and often in anticipation of—dynamic customer demands.?

While approaches can vary widely, these businesses often share one common trait: they are committed to evolving monetization, which is how a business aligns with customer expectations to create valuable products that generate revenue. Today, a static model, such as a traditional subscription with a set monthly fee, is often no longer enough to maintain a competitive edge.?

The winners in this evolving landscape will be those that not only navigate the immediate challenges of the economic environment and increasing competition, but also understand and anticipate customer demands. This future-focused approach will enable companies to lay the groundwork for sustainable recurring growth through customer-centric strategies and adaptable business models.

The SEI report analyzes the growth and resilience of businesses leveraging various monetization models designed to provide recurring growth. Comprised of anonymized, aggregated, system-generated activity on the Zuora Billing service, the SEI report shows the change in the volume of business for more than 600 companies.?

Read the report for additional insights and to see the full data

Key findings

The SEI continues to grow faster than the S&P 500

Despite global macroeconomic conditions and increasing competition, companies in the SEI continue to outpace the S&P 500. Over the past 12 years, companies in the SEI have grown 3.4x faster than the companies in the S&P 500, which have historically represented more traditional, product-based businesses.?

SEI quarterly revenue growth held steady over the past year, while the S&P 500 continues to decline.

A five-year analysis of quarterly revenue growth demonstrates that, while both the SEI and S&P 500 experienced an initial dip in response to the pandemic, the decline for the S&P was more severe. While the SEI appears to have returned to and is holding steady at pre-pandemic levels, the S&P 500 has been in a steady downward trend since its peak in Q2 2021.

Companies are retaining their customers?

Churn rates in 2023 dipped lower than the previous three years. Companies in the SEI saw an improvement in customer retention, with churn numbers falling below pandemic and even pre-pandemic levels.

Companies can better retain customers by focusing on customer value. This often means providing beyond the original service or product a customer signed up for. Examples of this include more flexible pricing or billing options to customers, who are also feeling the strain of slashed budgets.

State of SEI by sector

SaaS

Overall, the SEI SaaS sector continues to grow, but year-over-year (YoY) growth has slowed, correlating with macro SaaS trends. SEI SaaS companies employing consumption-based models experienced a cumulative revenue growth (CRG) rate of 10.4%.

Recently, hybrid consumption models that combine predictable subscription approaches with more variable usage models have stepped to the forefront as drivers of recurring revenue.?

Although the SaaS sector is still fine tuning these pricing and packaging strategies, the results are promising when comparing the current performance of hybrid consumption with non-consumption and all other SaaS monetization models in the SEI.?

Media and entertainment

In 2023, companies in Media & Entertainment experienced a pivotal evolution, navigating a mixture of market-rocking challenges while seizing growth opportunities. The SEI Media & Entertainment sector observed a revenue growth rate of 6% on average in 2023, highlighting the resilience and adaptability of media companies in a fluctuating market landscape.

SEI New Media (examples of which include streaming and gaming companies) is leading this sector at an impressive 12% revenue growth rate on average, but SEI Publishing Media (examples of which include traditional and digital newspapers and magazines) grew by a more modest rate of 5.6%.

Manufacturing

Despite a contraction of U.S. manufacturing, the SEI Manufacturing sector grew at an impressive rate of 14.1% in 2023 compared to the SEI overall at 10.4%.

Year-over-year, SEI Manufacturing revenue increased at a rate of 0.5% on average and churn decreased at a rate of? -.4%. In keeping with the SEI as a whole, account growth for the SEI Manufacturing sector is down, which means that fewer customers are adding new services.?

However, the data suggests that manufacturers could be leveraging retention as an opportunity to grow with existing customers over time, as ARPA growth increased by 2.49% YoY.?

Read the report for additional insights and to see the full data