Humanizing Subscription Businesses | Part One
n an upcoming series of articles, we are going to compare subscription-based business models with those built on one-off sales. We will explore how successful subscription-based businesses revolve around customer changes, and pinpoint where that shift happens so that companies can retain customers, nurture customer loyalty, improve customer advocacy and ultimately support business outcomes.
In this article, the first in the series, we are going to explore customer relationships and how moving to subscriptions from one-off sales changes them. There are two key components in the sales process for subscription-based businesses:
1. Winning the client
2. Keeping the client
This sounds obvious, but the two are very different. Where businesses often come unstuck is in understanding the human needs of their customers as they transition from the point of sale to an ongoing, dynamic relationship.
Building block of human relationships
Subscription models monetize long-term relationships, not products. The finances of a subscription-based business hinge on repeat income. Netflix might charge $15.50 per month for their standard plan, and en masse (221.8 million subscribers in 2021) that’s commercially interesting. However, the real benefit to them is clearly not in those 221.8 million paying for one month of service, but in retaining each customer month after month - it’s about the long-term relationship.
In the words of keylight Founder, Marco Sarich
"Time is the added component that contributes to the complexity of every business process for subscription models."
At the start of the article, we mentioned that there’s a conflict between the one-off sales process that many businesses are familiar with and the need to maintain or develop ongoing relationships as part of a subscription model. This is where the human element of your business is at its most important because it requires doing what you do well now, but also developing and moving forward together.
A one-off sale has a beginning, middle, and end until the customer wants to buy again. The customer subscribes in a digital subscription setting, and the customer relationship becomes the main asset. It’s about maintaining a relationship, and as we all know, relationships take work.
It can take much longer to sell someone into a subscription-based business than a one-off product or service, and there’s an ongoing investment both in terms of time and resources as well. However, combining the Customer Lifetime Value and the knowledge that it costs, on average, five times more to win a new customer than retain an existing one, it’s worth getting that relationship right. In many ways, it should be an extremely rewarding process for both your business and the customer, with the chance to develop it over time and gain invaluable insights about your market.
Foster personal interactions through subscriptions
Subscription-based businesses are actually about people and how they interact with each other. However, when most of us think about subscriptions, we tend to focus on recurring revenue, which is devoid of the human aspect.
According to Deloitte, eight out of 10 companies sustained or grew their subscriber base during and beyond the pandemic, showing both extreme relevance in today’s world, as well as a high degree of resilience and sustainability in times of crisis. In essence, people like subscriptions.
However, a subscription-based business is not as simple as collecting payment each month and leaving the customer to it. Initial transactions don't just turn into relationships - they require interactions and observations at key moments to nurture trust, loyalty, and product/service satisfaction. Once we refocus our thinking on customer centricity, the way we approach sales shifts. We start to take a much longer-term outlook essential to a subscription model.
If you compare it to our human interactions, both personal and professional, the people who predict and meet our needs are the ones we want to stick with.
Long-lasting relevance in the Industry
In a business environment where disruptors are constantly emerging and changing the game, it’s essential for all businesses to understand their customers’ wants, needs, and future needs in order to remain competitive and relevant. After all, which of the major supermarkets worldwide would have predicted that an online bookseller would be ranked as the top grocer in the US in 2021?
That need to stay relevant applies to all businesses, and it hinges on customer insights and customer understanding. However, the emphasis is even greater for subscription models, which need to think about maintaining relationships every day.
If we approach our work by questioning our ongoing and future relevance to the customer, then we open up a different way of thinking. We focus on customer experience and customer engagement, asking ourselves not just whether our product or service works today, but how it will evolve tomorrow and what can be done better?
Predicting the future
Subscriber relationships evolve over time - they are dynamic. The customer might upgrade, downgrade, there might be opportunities for cross-selling, and so forth.
These changing relationships are partly to do with the requirements of the individual, and partially to do with the changing market around us. With subscription-based businesses, we are always balancing the knowns of today with the knowns and unknowns of tomorrow. It’s exciting - it’s also quite a lot to handle, which probably explains why so many companies fall wide of the mark.
Service and customer needs are evolving and changing constantly. On an individual level, we know that gathering information on a customer can help us significantly in understanding the chemical make-up of that person’s life, how our product or service fits into it, and how their needs might change over time. However, the data can only take us so far - it’s customer-centric thinking that’s essential for interpreting the information effectively, and translating it into actions.
Ultimately, it’s also making the customer choose to retain their relationship with you, a proactive one. How many times have you heard of someone staying with their mobile phone provider or their car insurance because they can’t be bothered to change it? It’s not enough for customers to stay with you out of inertia - you want them to enjoy their experiences with you, see it as a positive contribution to their lives, and proudly recommend you to friends and colleagues.
Turning challenges into opportunities
The big challenge to customer-centricity is finding a way to be human and personal in an impersonal, digital world, whilst also respecting privacy. Getting that right is something of an art form and it’s an ongoing rather than static process.
Knowing that there is a need to have a relationship with customers is not new, but turning it into a reality is where businesses are often trapped by technical blockers and outdated thinking. For example, traditional commerce and billing systems are not designed built for either subscription models or long-term relationships, but for recurring product sales.
As a result, they are inflexible for businesses wanting to roll out new ideas, which usually means that it takes a lot of cost and labor-intensive customization to adapt and update processes in line with evolving customer needs. The result is that they lose focus on the customer relationship at the heart of the business model.
Our goal is to help our clients to build long-term partnerships on the basis of a scalable and extendable product that enables our customers to implement and grow their ideas.
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