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Building a subscription business in 2015

customers connected online

The “subscription economy” today is presenting a sea change from selling products to selling subscription-based services. Providers of items such as books, cars, education, food, home monitoring, music, software, travel, wearables are pivoting to subscription business models that generate recurring revenue.

The companies having the most success are completely rethinking their relationship to their subscribers. These organisations are changing what they deliver and how they deliver it based on a deep understanding of the “subscriber experience.”

“Subscriber experience” is comprehensive, focusing on how to build subscriber trust and loyalty from initial contact through registration, service delivery, customer support, billing and payment, account modification and renewal.
Here are five ways for your business to succeed in the subscription economy.

1. Adapt to the needs of your subscribers.

Consumers today want to customise everything. They want their services accessible on multiple devices, and they want to change the level of service to meet their current needs. They recognise that the vendor’s imagination and willingness to implement changes are the only limits the adaptability of software and services.

Organisations need to use what they know about their customers to adapt the service to subscriber needs and allow subscribers to further customise their experience. For example, Uber can fire up your Spotify playlist when you get in the car. Google’s streaming music service can automatically offer a morning playlist suited for going to the gym and an evening playlist appropriate for dinner or unwinding.

The better vendors are at delivering customisation, the more of a stake subscribers have in the relationship and the less likely they are to switch allegiance.

2. Let your subscribers control the level of service.

Don’t force users to consume more of the service than they need. That’s a common cable industry practice that has many subscribers searching for alternatives.

If a service is expensive and subscribers don’t see immediate value, they will move on. Your marketing may have worked to get someone to sign up, but if they drop off right away, they have cost you more than you’ve made off of them. If your subscribers can start at a comfortable monthly fee and easily increase and decrease the level of service to align with their current need, you may well create a loyal customer.

3. Keep improving to cultivate customer loyalty.

In the product economy, you sell an item with a set of features, then create the next generation of that product to entice customers to upgrade. Some companies even have a strategy of planned obsolescence to force consumers to buy the new version.

In the subscription economy, the goal is to keep your subscribers for the long term by continually improving the service. This is what companies like Amazon and Tesla have done so successfully. Loyal users anticipate exciting new features, which are delivered automatically, making subscribers feel they are getting more and more value for the same monthly fee. It’s a win-win. And if the new features deliver enough additional value, subscribers may increase their level of service.

4. Encourage subscribers to engage with you.

Subscribers interact with the world in many different ways, and the more value you can deliver through different avenues, the broader and deeper your relationships will be. But don’t think of your service as just one set of interactions that must be delivered “as is” through every channel.

For example, if you stream video games, don’t think you have to deliver a full gaming experience to a smartphone. Instead, just take your “brand” to the device, creating an integrated, multi-dimensional experience. Perhaps it’s the ability to practice certain game skills or see trailers of new games. Perhaps it’s access to the game forum and community news. Perhaps it’s information on logo wear that’s available near where the subscriber is currently shopping.

Be creative. It’s all about using what you know about your subscribers to find new ways to deliver value to them.

5. Put subscribers in control of their identity and privacy.

To build loyalty and trust, your relationships with subscribers must be mutually beneficial. This means giving up some power and control. Netflix faced an extreme backlash when it unilaterally raised prices because it broke a trust that existed but nowhere is trust more important than in the area of privacy and security. Your subscribers must trust that you care as much about their security as you do about access to their data. Let them control their privacy settings, even if it means not collecting some information.

Businesses need to create an ongoing, positive experience that continually delivers value. Subscribers will then have an incentive to stay with your service when the next hot start-up comes along offering cool new features or a competitor lowers prices. By establishing mutually beneficial relationships you inspire loyalty and trust in your brand that will pay off in the form of higher recurring revenues.

About the Author:

Written by Tien Tzuo, Founder and CEO of Zuora.

Founded in 2007, Zuora is widely recognised as one of the thought leaders in the software-as-a-service industry. As Zuora’s CEO, Tzuo has not only built one of the fastest growing SaaS companies, he’s also evangelised the shift to subscription based business models and the complex billing structures they inherit, coining the phrase Subscription Economy.