Over the last decade, the subscription economy has taken a new turn, and has now become the secret to succeeding in competitive markets characterized by skyrocketing customer expectations. Across industries, there are various types of subscription models that can be adopted depending on the customers they serve. For example, subscriptions in the automotive industry allow customers access to different vehicles in return for a monthly fee, or in the media industry, access to audio and video streaming services. For the customer, it means convenience and price advantage; for the seller, it means higher sales, customer retention, and revenue predictions. The success of the subscription model rests on customer-centric orchestration, powered by the right technologies – this can be witnessed in the 23% of overall business revenue that originates from subscription services in North America, according to the TCS Global Leadership Survey. But it also relies on a targeted, and well-strategized approach to make the transition. So, what's the secret to succeeding, and effecting growth with a subscription model?
What necessitates the shift?
Customer spending behaviors have changed; they increasingly value access to services and outcomes over ownership, and the ability to use them anytime and anywhere. They demand choice in how they pay, flexibility to pause and resume services, and the ability to tailor them to meet their specific needs. The pandemic has further accelerated these trends, and the ability to orchestrate subscription services with excellence can now demarcate the difference between leaders and laggards. According to a 2021 TCS Global Leadership Survey, subscription based offerings account for 30% of revenues for leading companies, in comparison to just 18% amongst followers.
The XaaS (anything-as-a-service) economy lowers the entry barrier for customers in both the B2B and B2C landscape and helps them become asset-light businesses that are more agile and flexible in the face of slow-downs and expansions.
Therefore, the shift to the subscription model is necessitated by the customer, the ecosystem, and a long-term view of businesses' strategic imperatives. Subscription models are a necessary value proposition for new entrants – and not embracing this can endanger a business' survival. Successful subscription businesses are today focusing on the ease of customer onboarding, access to the right products and services, and automating their service routines to empower the customer.
Getting subscription models right
Subscription models are not just about a change in the company's pricing and delivery models but also in the organization's mindset. They thrive on customer retention. And therefore, to participate in the subscription economy, the organization must commit to an unending effort to improve the customer experience, service innovation, sensitivity to customers' needs, and a focus on maintaining healthy retention rates.
Key success factors
Customer-centricity is critical for success in the subscription economy. Building a comprehensive customer profile with end-to-end cross-departmental process visibility and tying each checkpoint across all customer interactions is needed to offer high standards of service that are tailored to each customer's specific and unique needs.
The subscription model is ultimately powered by digital technologies that tether the right processes to the right roles in the organization. Here are three pillars of success in the subscription economy:
1. Building recurring relationships: The shift to subscription model necessitates focus on building recurring relationships with the customer. This entails a commitment to the customer's needs from the offering, and ease of service, onboarding, billing, and invoicing. Therefore, immaculate attention must be paid to the entire customer life cycle, inclusive of the off-boarding stage. To make the customers commit to a subscription, businesses must proactively help the customers extract their intended value. As a result, businesses must handle customer loyalty, pricing, and selling differently.
2. Technology as an enabler: Unifying front and back offices to fuel a seamless customer experience, the subscription model must eliminate the silos that demarcate billing, sales, service, and product teams. The front office and back office must stand integrated, and end-to-end processes must be deployed, owned by cross-functional teams. This task is shouldered by cutting-edge platforms from providers like Oracle, which direct teams along the right process vectors, and unify functions by paving the way for seamless collaboration across the organization. The quote-to-cash cycle must be integrated within a single platform, and cross-selling, upselling, and contract renewals must be augmented with a technological core that automates routines and integrates with the ERP and CRM to build a comprehensive, real-time view of the business.
3. Powering personalization with insights: Lastly, subscription models thrive on taking care of each customer as if they were the only priority for the business. In this era of hyper-personalization, customer-centricity bears great relevance to subscription models. Macro-segmentation must be replaced by micro-segmentation with a 360-degree view of customers. Therefore, the right technologies must be leveraged to fuel actions like upselling and cross-selling, and customer data platforms must empower customer success and support teams as they work to boost the experience across every single account. This is made possible by integrating various platforms and the underlying business data lakes and analyzing them to decode every digital footprint of the customer – which enables subscription businesses to maintain high retention rates.
Subscription businesses are powered by people and lead to business interactions to serve customers. But after the pandemic, top subscription businesses have shifted their focus on automating service routines and making experiences touchless and intuitive. New entrants must look up to such a target state, where product innovation fuels competitiveness in the market, and a thorough reinvention of processes powered by the right technologies enable small teams to run day-to-day operations smoothly. The opportunities are boundless – now is the time for companies to future-proof themselves by switching to a subscription model and unlocking their growth potential in today's markets.