In Today’s Subscription Economy, Customer Relationships Are Key
By Margaret Wise
In the not so distant past, software vendors aggressively peddled discounts on licenses as June 30 approached.
At many companies, June 30 marks the end of the fiscal year. So traditionally, it was a time enterprise customers could most easily negotiate lower prices on software licenses as well as free or discounted consulting and training.
But fiscal year-end software deals and concessions are going the way of landline telephones. You can still find them if you look hard enough, but most people no longer bother.
The world has moved to a subscription economy, shifting the priority from initial client acquisition to the effective adoption and use of a product or service.
Subscriptions = More Customer Engagement
As Forrester analyst Kate Leggett explained more than two years ago, the economic value of a customer now is realized over time, instead of at time of sale.
“This means that the duration of the customer relationship has a greater economic impact on the company’s financial health. Being successful in a subscription economy requires that companies actively manage their customers during their engagement relationship to ensure that they are realizing the economic value of their purchase,” she wrote.
No one understands the impact of this shift more than software sales representatives. Traditionally, sales reps offered deep discounts to incent purchases at the end of each quarter, especially the quarter marking the end of the vendor’s fiscal year.
Now they have to sell and resell the same customers, transforming their objectives from single purchases to generating lifetime customer value.
Benefits of Subscription Models
It’s a seismic change — one that realigns the organization focus all the way from marketing through to support. But subscription models offer potentially broad benefits for both businesses and customers.
They create stickier customer relationships, generate deeper customer insights, and equalize the balance of power between businesses and customers.
Businesses gain the ability to predict revenue through recurring sales — as long as they serve the needs of the same customers consistently, repeatedly, and over the long-term.
Customer-Centricity is Essential
Vendors today can’t leave customer experience in the hands of their sales reps. Rather, they need to support their sales teams by providing better brand experiences for client retention. They also need to provide their sales teams better support for tracking renewals and customer issues to reduce churn.
By any measure, this is a huge change. It’s even, to use an admittedly overused buzzword, disruptive.
Companies with strong commitment to their customers will win in the subscription economy. These are the ones that are willing to evolve their brands and connect with their target audiences in new and unique ways.
These companies view the rapid growth of subscription models less of a threat than an opportunity.
How to Thrive in the Subscription Economy
To maintain sustainable operations in the subscription economy, companies have to rethink how they operate.
The number of units shipped or numbers of licenses sold are no longer today’s model for success.
Now, we measure success through the outcomes a company delivers and the consistent, positive interactions it maintains with its customers.
In the subscription economy, all companies must understand why their customers buy from them. They also need a clear understanding of how their products or services improve their customers’ lives.
In short, it’s all about the customer … no only today, but tomorrow, too.
Need help realigning your business for today’s subscription economy? Customer journey maps are great places to start. Contact MWise@arke.com for more information, including a copy of ARKE’s Journey Mapping Workbook.
Originally published at education.arke.com on June 28, 2017.