Managing a Subscription Business – Do’s and Don’ts

As a proverbial “last mile” service provider, we have the privilege of working directly with the consumer and helping them fulfill their needs through add-on products and services portfolio. Typically, these are offered as a bundle or stand-alone, depending on the strategic provisions and consumer preferences.

For instance, cable companies may bundle their core service (video) with telephony, Internet, security, etc. Recently, a lot of research has been published, particularly as it pertains to Internet-of-Things (IoT), on what other services and products may be eligible for a place in the portfolio, such as, digital health, premium technical support, hardware, premium content, among others. As general managers (GMs), we have to hence consider a variety of factors when creating a portfolio that delivers “net” subscriber growth, and suits the company goals, core product offering and consumer preferences.

Here I want to share a few key findings – do’s and don’ts – about the “consumer preferences” that shape how well we forecast subscriber and revenue, and in turn, the portfolio performance.

• Do promote multiple products at the time of acquisition, as long as they complement the core offering.
• Don’t overload however – too many decisions at the time of initial purchase will usually put off the customer, and you may stand to lose a customer of your core product.

• Do consider pricing when offering multiple products at the time of first sale. Total price that a customer can commit to, requires an in-depth understanding of your target customers and their ability to afford the payment commitments.
• Don’t over-sell the products with higher price points. This may result in a good initial ARPU, but also causes churn sooner than predicted.

• Do take the buyer’s remorse into account, since most churn occurs within the first 30 to 90 days of subscription. The above factors usually contribute to it, besides the product/service quality delivered. After the first 90 days, the pattern sets in and customers are usually comfortable with the product, pricing, etc.
• Don’t over-emphasize the value delivered by your complementary products/services. It is OK for the customer to be a loyal subscriber to your core product – there will be other opportunities to up-sell and cross-sell.

• Do model and plan acquisition and retention targets that are consistent with industry standards and account for the unique motivations of your target market. For example, product “x,” may sell better in urban vs., rural market, or how easy it is for a customer to buy a complementary product through other vendors, etc. Model out the optimum product/price mix, based on customer propensities and limitations.
• Don’t set unrealistic expectations on acquisition and retention metrics. With more products in the portfolio, acquisition targets may need a revision. Similarly, retention is a challenge, if the customers are not happy with the quality or pricing, or are too invested in your portfolio.

I am sure there are more factors that may warrant a consideration and with continuous data analysis (Big Data anyone?), we may be able to further refine our approach to growing the subscription business, while maintaining a healthy product mix, margins and customer satisfaction.

Is your organization truly in a digital age?

Data is in abundance on consumers and their online engagement, be it content and/or eCommerce. What this means is that the marketers need to be more savvy about customer needs than applying “one size fits all” approach to talking to their customers. Digital competency is hence about harnessing this data and utilizing it to segment, target and serve the customers – need I say “real time!” 

To become a digital-savvy organization, we require an understanding of our marketing touch points and internal infrastructure that can support a multi-pronged approach to customer reach. Marketers need to ask the following questions in their organization:

1. What digital experience drives engagement and conversion in our company/industry?
2. What marketing channels are effective for what customer segments and why (data to support the claim)?
3. What data is captured in our systems and is it compatible across customer touch points?
4. Who owns the digital experience and are the right people empowered to make “consumer-centric” decisions?

If the answer is not a definitive yes to all of the above, I’d suggest there is some work that needs to be done in achieving true digital competence. The road map should hence, clearly identify deficiencies and investment needs to start utilizing the amazing power of our digital interaction with customers. Some of our more familiar metrics such as; customer acquisition rate, retention, marketing ROI, CLV, ARPU, etc., will then truly represent a view into our marketing success and provide deeper insights into how to optimize customer experience.

What pays more – customer acquisition or customer retention?

This is not an “either/or” question, rather an attempt to raise an organization-wide awareness and debate on the topic, which appears to be mostly confined within the marketing organizations.

However, if I had to pick one, I'd say invest in nurturing the customers you already have. In my experience, organizations spend way too much on acquisition and tend to treat retention as secondary - as long as net keeps growing, the numbers will (likely) be met.

Why nurture the current customers? They have already made the choice, are paying your bills and stay because they like the service. However, as the customer base grows, there is often the challenge of scaling the infrastructure to continue to maintain the service levels. To keep the customers happy, you need to invest in systems and infrastructure that support the quality of service the customers expect. This may include IT systems, new talent, sales policies, user experience design, etc.; whatever is needed to keep up with the scale of growing customers and their expectations. 

If you can deliver the high standards of service consistently, you will be noticed. We probably offered perks and incentives to bring the new customers in, but with the quality service standards in place, we will continue to ensure that new customers don’t feel slighted, when the initial euphoria of signing-up and “honeymoon” period (free this and that for acquisition) is over.

Also, if you are considering product changes and/or new offerings to expand the services portfolio, the current customers can provide valuable market research insights, if approached in a right way. In addition, customers will start to trust the brand and, in turn, may reward you with buying your other products and services. That’s when we start to realize the full potential of our customer base and gain a greater share of their wallet. So, here are the top 5 reasons to nurture the current customers.

1. They are here and paying the bills
2. They can help improve your products and services
3. They will be more inclined to buy your other “value-added” services
4. They can provide precious market insights for your strategic programs
5. They are and/or will advocate your brand at no cost to you

The ROI of investing in systems to sustain high service standards, as promised in the marketing material, will quickly start to show. Growth will then not be a one-dimensional look into how well your acquisition efforts are performing.

Presenting Consistent Brand Experience to Customers

In all my experience working with organizations there has been a visible lack of coherent strategy for customer communication via various touch-points. I am referring to customer service, corporate websites, social forums, blogs and marketing campaigns. To be fair, the challenge has been in rapidity with which changes have been taking place across the above landscape, which makes the job of “keeping up” all the more difficult. However, these have now been around long enough that customers expect organizations to button-up and present a consistent brand experience.

I believe the challenge is not in how to deliver a consistent experience instead, why organizations fail to deliver a consistent experience across its customer touch points!

I find the lack of adequate investments, executive support and unclear role descriptions as the key factors that companies need to focus on. The benefits of a consistent communications approach are many – brand growth, customer retention, acquisition, etc., to name a few. So where does one start? If there are separate sites for sales, customer service, account management, etc., consolidating all into one consistent look & feel is a good start. Consolidating, with all reporting into one organization, will also help with messaging consistency that often gets lost in subjectivity across business units. Next step would be ensure customer can easily navigate between various sites as they engage with the brand. Now we are ready to actively interact with your community via, blogs (if? there is one!) and across social spectrum. Also, providing information and self-service tools across your company sites is trivial, yet engaging. Digital presence needs to be integral to overall strategy and appropriate controls need to be in place to ensure accountability, regular updates, monitoring and reporting.

Once we achieve an integrated look & feel for our brand, we can then start to understand customer behavior across these touch points and, in turn, start providing better products/services/support to our customers.