Whether or not your company employs a subscription business model for part or all of your business, subscriptions are making an indelible mark on it. Customers have come to expect many of the things that subscriptions inherently do well and even conventional vendors are coming under pressure to deliver them.
This has completely changed the customer experience for the better, at a time when customers are becoming more vocal with their demands often voting with their feet and credit cards. Any business can improve its customer experience by observing what subscriptions deliver automatically. But beware, unless you provide a subscription model this might be difficult.
Some of the best attributes of the Subscription Experience developed by necessity and out of adversity. In many cases subscription vendors don’t have the margins to invest in conventional customer outreach and, as a result, they’ve had to retool their offerings for simplicity and ease of use; they’ve also had to rely on big data ideas to help them understand customers. Subscriptions, and the subscription customer experience, are attractive because they empower customers and here are some examples.
This is where moments of truth originate. Every business has them but subscription companies have to do a better job. Where conventional vendors might assume they know that customer moments of truth are, and build their business processes accordingly, subscription vendors have to know with statistical precision. A conventional vendor can afford to be wrong about moments of truth but subscription vendors, because their revenues trickle in, have to be on target or risk churn and attrition.
Because subscriptions focus on the here and now, subscribers have a wide array of options for payment, which almost always focuses on delivering a service for a very low monthly cost per user. This has opened up many markets where use of powerful or sophisticated products was once limited to large companies that could afford high prices. Small subscribers find themselves able to purchase the same tools that their larger competitors use thus flattening the playing field.
Subscribers can and frequently do elect to increase or decrease their use of services giving them the ability to throttle consumption based on their needs rather than over buying to ensure coverage for peak periods. At the same time, customers can elect to leave a service when it no longer meets their needs without having to worry about stranding assets. This has had both a liberating effect on buyers and has focused the attention of vendors seeking to maximize the user experience as well as their profits.
So subscriptions have put customers into the center of relationships like never before, but they have also delivered significant advantages to vendors, too. Rather than having to guess at what customers need, want, like, or dislike, vendors now can, to a high degree, know these things in fine detail through analytics. At the same time, customers are able to have more organic relationships in which their needs are anticipated. Also, in many cases vendors can keep their costs under control by managing by exception. The creates a self-reinforcing relationship that expands from there.
We often describe subscriptions as turning products into services and that’s right but it only tells half of the story. The other part is that customer service is not some separate thing that customers have to purchase separately or wait in line for. There are few stovepipes in a subscription organization because the same mechanisms used to deliver a product as a service are also used to provide customer service and to sell new or additional services. This tight integration simplifies the customer interaction and relationship blurring the lines between product and service to render a more coherent customer experience.
Subscription companies run more on exception than by the random attempts at interaction that conventional companies rely on and this enables them to be proactive often heading off problems before they happen. By their nature subscriptions generate a lot of data — big data — and using big data concepts like analytics and metrics, subscription vendors can search through records of customer interactions to develop an understanding of normal customer activities.
Importantly, an understanding of “normal” automatically generates a statistical understanding of exceptions. For instance, a vendor might learn from statistical analysis of aggregate customer data what a typical customer ramp up time is. Customers that go over this average might be more likely to churn or not purchase upgrades. So the vendor has the ability to not only monitor but to intervene when it appears that a customer is having difficulty. This managing by exception enables the vendor to keep costs under control while still deploying needed resources where they will do the most good.
The subscription business model fosters greater collaboration both between the vendor and subscriber but also between customers and many subscription vendors have taken advantage of this to sponsor communities in which customers collaborate between themselves and with the vendor.
Consequently, more information circulates to and from all parties ensuring an amount of transparency not seen before which helps all parties. Through communities, customers help each other to understand products and strategize best uses. At the same time, vendors have more efficient means for transmitting and receiving ideas that can inspire new products and improve existing ones.
Some things don’t change even with subscriptions — vendors still sell and service and customers still buy and demand. But with subscriptions, there is a more natural and dynamic relationship built on trust and sharing that translates into greater satisfaction for customers and sustainable profits for vendors. At their base level, subscriptions are a communication device specialized to center on solutions and business processes that are of mutual interest to all parties. While it’s true that many subscription attributes can be delivered individually through conventional vendor-customer relationships, it’s hard to see how they could all be delivered profitably. Conventional companies charge more for their products and services but their costs are also higher so meeting the demands of subscription business without simply adopting the business model will be a challenge. That’s why subscriptions are so important for interacting with customers today. The model just works and that’s why it continues to exert an attractive force on business that’s almost like gravity.