Subscription revenue metrics

  • Release version: Xanadu
  • Updated October 10, 2024
  • 5 minutes to read
    • Summarize
    Summarized using AI
    This content was generated using new OpenAI-powered functionality. Results are provided on an as is basis and are not guaranteed to be accurate or complete.

    Summary of Subscription revenue metrics

    Subscription revenue metrics in ServiceNow Sales Customer Relationship Management (CRM) automatically calculate and present key subscription revenue values for opportunities and quotes. These metrics help sales agents and managers monitor, forecast, and analyze the financial impact of subscription-based deals by showing recurring revenue amounts such as Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) at both header and line levels.

    Show full answer Show less

    Key Features

    • Subscription Pricing Metrics: Includes Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), Annual Contract Value (ACV), Total Contract Value (TCV), and Term (subscription duration in months).
    • Automatic Calculations: When agents add product lines to opportunities or quotes, the system uses product pricing and details to auto-calculate subscription revenue metrics, displayed in pricing details.
    • Term and Pricing Pro-Ration: Agents can enter or modify the subscription term, which the system uses to calculate end dates and pro-rate prices daily based on monthly or annual periodicity.
    • Opportunity Line and Header Metrics: Metrics such as cumulative MRR, ARR, ACV, TCV, and one-time prices are calculated for line items and summarized at the opportunity header level considering quantities, pricing, and terms.
    • Quote Line and Header Metrics: Similar subscription revenue metrics are calculated for quotes, including monthly and annual recurring prices, one-time prices, and total amounts, linking to opportunity terms if available.

    Practical Benefits for ServiceNow Customers

    • Enables accurate tracking of recurring and one-time revenue components within sales deals.
    • Improves forecasting and sales performance analysis by providing standardized subscription revenue metrics.
    • Supports comparison of contracts and deals through consistent annual and total contract value calculations.
    • Simplifies sales processes by automating subscription revenue calculations, reducing manual errors.
    • Facilitates clear communication with customers by presenting relevant subscription pricing details during sales engagements.

    Application in ServiceNow CRM

    Sales agents can enter subscription terms and product lines in Opportunity Management and Quote Management modules. The system calculates and displays subscription revenue values dynamically in the pricing details of opportunities and quotes, aiding decision-making and deal evaluation.

    Subscription pricing is a pricing model where customers pay a recurring fee for products or services, usually at regular intervals such as monthly or annually. In Sales Customer Relationship Management, various subscription revenue amounts are calculated automatically for opportunities and quotes.

    Subscription revenue amounts are metrics that help sales agents and sales managers track and analyze the revenue impact of sales deals. Sales agents and managers can view these system-calculated revenue amounts in the pricing details for opportunities and quotes, both at the header and line levels. These revenue amounts, such as monthly recurring revenue (MRR) or annual recurring revenue (ARR), are useful for monitoring sales performance, forecasting subscription revenue, and providing relevant subscription amounts when agents engage with customers.
    Figure 1. Example opportunity subscription revenue details
    Opportunity line and Opportunity header records that display system-calculated subscription revenue values described in the opportunity subscription tables that follow

    Subscription pricing metrics

    In subscription pricing, common metrics for assessing subscription-based revenue include the following values and items:
    Monthly Recurring Revenue (MRR)
    The total revenue generated from recurring subscriptions or contracts on a monthly basis. It helps sales agents and managers assess the stability and growth of subscription-based revenue streams.
    Annual Recurring Revenue (ARR)
    The annual revenue generated from recurring subscriptions or contracts. It provides insights into the predictable revenue stream that can be expected from existing customers over a year.
    Annual Contract Value (ACV)
    The total value of a contract on an annual basis. It highlights the annual revenue impact of a deal and facilitates comparison with other contracts or revenue streams.
    Total Contract Value (TCV)
    The total value of a contract over its entire duration, including recurring and one-time charges. It provides visibility into the overall value of a deal and its impact on the organization's financial performance.
    Term
    The duration or period of a subscription or contract, in months, such as 10 months or 24 months. In Opportunity Management, agents can enter a Term value before adding line items. In Quote Management, when agents enter a Term value and the subscription start date, the system uses the term value and start date to auto-calculate the subscription end date. If an agent changes the subscription end date, the system recalculates the Term value.

    For products with monthly periodicity, the per-day price (pro-rate multiplier) is based on the Unit list price/number of days in the month. For a product with annual periodicity, the per-day price (prp-rate multiplier) that is multiplied against the decimal fields is the Unit price/365 days or 366 days if the year is a leap year.

    How subscription pricing revenues are calculated

    Product offers for products and services contain basic pricing information, such as list price and pricing method (either one-time or recurring periodicity). When agents add product lines to opportunities and quotes, the system uses basic pricing information and product line details to auto-calculate the various revenue subscription values. These values are calculate and displayed in both the header pricing details and line pricing details.

    For example, when an agent adds an opportunity line, the system calculates the Cumulative Monthly Recurring Revenue (MRR) amount using the unit net price and quantity of the product. The system then sums up the cumulative revenue to the parent line in the opportunity and displays the cumulative MRR in the pricing details of the opportunity header.

    When agents use the configuration UI to add customizable products to quotes, the configurator interface displays the calculated subtotal values such as the Cumulative Monthly Recurring price for the root product offer of the line item.

    The following tables describe the subscription pricing revenue amounts for opportunities and quotes and how they're calculated.
    Table 1. Opportunity line subscription revenue metrics
    Opportunity line subscription metric Description Calculation
    Unit net price Price of a single unit. Unit list price
    Note:
    Unit Net Price = Unit list price only when the opportunity is not in sync with the quote.
    Cumulative one-time price One-time price of the opportunity line and any child lines.

    Unit net price * Quantity
    Cumulative MRR Cumulative monthly recurring revenue of the opportunity line and any child lines. Not calculated for one-time products.
    • If the periodicity is monthly: Cumulative MRR = Unit net price * Quantity
    • If the periodicity is annual: Cumulative MMR = (Unit net price/12 months) * Quantity
    Cumulative ARR Cumulative annual recurring revenue of the opportunity line and any child lines. Not calculated for one-time products. Cumulative MRR * 12 months
    Cumulative ACV Cumulative annual contract value of the opportunity and any child lines. Cumulative One-time price + Cumulative ARR
    Cumulative TCV Cumulative total contract value of the opportunity and any child lines. Cumulative One-time price + (Cumulative MRR * Term months)
    Table 2. Opportunity header subscription revenue metrics
    Opportunity header subscription metric Description Calculation
    Amount The total contract value. Total contract value if there are opportunity line items. If no line items exist, this amount is copied from the Estimated Deal Size.
    Weighted amount Value that represents the potential size of a deal. Amount * Probability
    Total One-Time Price Sum of all the cumulative one-time prices of the opportunity line items. Cumulative one-time price of the top-level parent
    Total MRR Total monthly recurring revenue. Sum of the Cumulative MRR values of the top-level parent.
    Total ARR Total annual recurring revenue. Sum of the Cumulative ARR of the top-level parent.
    Total ACV Total annual contract value. Sum of the Cumulative ACV of the top-level parent.
    Total TCV Total contract value. Sum of the Cumulative TCV of the top-level parent.
    Table 3. Quote line subscription revenues
    Quote line subscription metric Calculation
    Monthly recurring price
    • If periodicity is monthly: Monthly recurring price = Unit net price * Quantity
    • If periodicity is annual: Monthly recurring price = (Unit net price/12) * Quantity
    Annual recurring price Monthly recurring price * 12 months
    Cumulative net price Unit List Price - Total adjustment
    Cumulative one time price One-time price for the line item + (if parent line item) One-time price for all child line items
    One-time price One-time price for the line item.
    Table 4. Quote header subscription pricing
    Quote header subscription metric Calculation
    Term The duration in months for subscription or contract. If an opportunity exists, the value comes from the opportunity. Otherwise, the default term is 12 months.
    Total one-time price Sum of all parent lines.
    Total monthly recurring price Sum of the Cumulative monthly recurring price of all root parent lines.
    Total annual recurring price Sum of the Cumulative annual recurring price of all root parent lines.
    Total amount Sum of the Cumulative net price of root parent lines.

    To learn more about the revenue metrics in opportunity details, see Add and view the details of an opportunity and Add line items to an opportunity.

    To learn more about the revenue metrics in quote details, seeAdd details to a quote.