Humanizing Subscription Businesses | Part two
ollowing our last article, we know that the customer relationship is the main asset in subscription-based businesses, which makes the customer experience central to success. In this article, we look at the traditional sales cycle in comparison to the sales cycle of subscription models. By focusing on customer experience we can understand how it enables businesses to develop their sales process for improved customer acquisition and retention.
Traditional sales and subscription sales explained
The traditional sales cycle
The traditional sales cycle feels more like a straight line than a cycle, with a clear beginning, a middle, and an end from the customer's perspective. Typically the approach doesn’t seek to nurture a relationship, and there’s little engagement after the sale is complete. The result is that businesses have very limited insight into what customers do with, or think about, the product or service unless there is a complaint made. This makes it very hard to understand the customer experience and leverage that knowledge to drive more sales.
The subscription sales cycle
By contrast, a successful subscription sales cycle is more nurturing. It’s about understanding the customer so that you don’t just sell them a product or service, but so that they receive the right level of service for their needs. This is essential because the goal is for the customer to be satisfied with their purchase and to maintain it for long-term use rather than canceling the subscription down the line.
Once a customer has bought into the product or service, the cyclical nature of the sale moves into the next phase as businesses seek to monitor use, interactions, feedback, and customer behavior. This enables them to understand or predict the customer’s future needs and ultimately keep using the subscription. The information that’s gained relates both to the individual customer and to the wider development of the company and its offering in order to stay relevant to the market. That focus on experience follows all touchpoints, from payment to customer service.
The significance of customer experience
While there’s a lot of conversation in the ether about customer experience, one could be forgiven for thinking that if the product or service works, why would customer experience beyond the initial point of sale really matter?
To set some context, American fintech corporation FIS’ 2019 Subscriptions: Always On Report predicted that by 2020, 50% of adults would have access to four digital subscriptions, a 50% increase from 2018. A 2019 PwC Global Consumer Insights Survey of 21,000 online consumers in 27 territories showed that almost 75% of those asked had up to three healthcare, wellness, or fitness apps they subscribe to alone. On a general note, it’s also worth remembering that it’s widely reported that “75% of organizations believe themselves to be customer-centric but only 30% of consumers agree.”
The FIS report, detailed on Digital Commerce 360, went on to say:
“Nearly 42% of users say they stay subscribed beyond the first month because they appreciate the ‘personalized or tailored’ nature of services. A further 19% do so because of the ‘convenience’ that a subscription service provides.”
They also noted that:
“68% of customers who cancel their subscriptions do so because of poor customer service.”
Of course, this is not the only data available. McKinsey & Co. has long highlighted the link between customer experience and financial value. In their recent report, Prediction: The future of CX, they noted the importance of predictive analytics rather than relying on surveys and lag information. In short, the businesses that are having the most success, don’t look to fix problems retrospectively but to provide a great experience and to anticipate customer wants and needs as well.
Navigating through the subscription business path
Starting with the right mindset
We mentioned in our last article how most people think about recurring revenue when contemplating subscription-based businesses. However, while repeat revenue is a characteristic of the model, it’s not the most important asset - that’s the customer relationship. Starting with the wrong mindset leads to decisions that negatively impact the customer experience and therefore business outcomes, for example, choosing inadequate operating systems.
Choosing the right systems
Very often, subscription-based businesses will set out to use an e-commerce solution and adapt it to its needs. These platforms are finance-driven and product-centric. As a result, they are not built for human interactions, and customer relationships were not considered when they were created.
Subscription systems need a different approach. They need to be designed with people in mind. As commerce platforms are created with products in mind and billing systems with recurring revenue in mind, they tend to be extremely difficult to integrate with each other and into customer-focused businesses values. This presents enormous technical difficulties if you want to make minor updates to customer experience (implementing a free trial, for example), and the outcome of improving human experiences is only trackable with financial reports.
For subscription-based businesses consistency of experience is essential, upgrades are regular and experience must be consistent throughout the entire customer lifecycle. When things are built for people it must be end-to-end.
The thinking behind trying to adapt a commerce platform for subscription use rather than creating a customized system stems from the idea that it will be more cost-effective. In reality, the inflexibility that these platforms offer results in an extremely costly and clunky process to reach the desired outcomes, which are almost inevitably compromised.
A personalized approach
A positive customer experience hinges on personalization. In the world of subscriptions, it is not just about making it easy to find the hotline for the complaints department, it’s about creating experiences that fundamentally make the customer’s life better. Achieving that means building the background, the team mentality, and the systems that will deliver positive experiences time and again.
In the words of customer success professional, Stephen Danelutti, who works for Microsoft:
“In commerce, customer experience (CX) is the product of an interaction between an organization and a customer over the duration of their relationship. This interaction is made up of three parts: the customer journey, the brand touchpoints the customer interacts with, and the environments the customer experiences (including digital environment) during their experience.”
With all of this in mind, the customer experience is clearly essential to the success of any company, but especially a subscription model. What often gets forgotten in subscription-based businesses, however, is that the details of that experience are very different from those experienced in a traditional sales approach. There are more opportunities to succeed in a subscription model, but there are also more ongoing touchpoints where it can go wrong. It begins with building the right background knowledge and systems to serve the needs of the customer and the business; systems and processes that can be adapted to stay relevant going forward. It’s about proactive customer lifecycle management and that’s exactly what we facilitate at keylight.
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