To keep customers renewing, you need data-driven insights and a frictionless customer experience
What do tacos, NFTs, and invoicing software have in common? You can—or soon will be able to—get them as a subscription.
While those examples are new, subscriptions themselves are not. From newspapers and magazines to Amazon Prime and Peloton, they’ve been part of consumers’ lives for decades. In the B2B space, software-as-a-service (SaaS) became the go-to delivery model for many business applications—Salesforce, Office 365, Dropbox—following the proliferation of cloud and hosted computing.
Now, subscriptions are crossing into new industries. They’re becoming a viable option for products and services that have never before seemed right for this model. They offer both B2C and B2B businesses the opportunity to capture a new—and more predictable—revenue stream. And their popularity is growing:
These stats should make organizations wonder: Is a subscription model right for our business? Is it right for our products and services?
But deciding on a subscription offering is just the beginning. For a subscription to generate value for your business, it first needs to add value for your customers—otherwise, they’re not going to buy it or renew it.
So how do you create that value? Among other things, you need data-driven insights and a frictionless customer experience—and businesses with a digital operating model are better positioned to deliver on both. Here’s what we mean.
The ability to collect, analyze, and use data is embedded into a digital business’s operating model. It’s what you need to stay ahead of and deliver on what customers want—and, in a subscription model, it’s how you attract, retain, and grow your subscriber base.
Data on your customers—what they want and need—should define your initial subscription offering. But beyond that, subscriptions provide a gateway to even more data that can be leveraged, such as:
When paired with predictive analytics and modeling tools, this data can help you make better, faster decisions about your subscription model to:
You can also use data to make your subscription more valuable to customers by:
People like subscription services for lots of reasons: cost, convenience, control. But subscribers-only rates and automated payments are the bare minimum that customers expect from a subscription. Another thing they expect? Simple, functional ways to engage with their subscription, whenever and however they want.
That means building a subscription model takes more than a great idea for the product or service you want to offer. You need to design a customer experience to match—one that seamlessly bridges both of the worlds today’s customers live in: the physical and the digital.
So what should that look like in a subscription model? Let’s consider an example from an industry dipping its (theoretical) toes into subscription-based services: banking.
Many financial institutions offer “concierge banking” perks—identity theft protection, trading portfolio management, extended warranty services—but only to enterprise or private banking clients, or to credit card customers as part of an annual fee. Now, community banks such as Baltimore-based Howard Bank have begun bundling extras like these into a subscription attached to a customer’s account.
It works like this: Customers upgrade their free checking account to one of two options. For $7 to $15 each month, they get all the banking essentials of the free account—plus access to perks like discounts on local and national retailers, roadside assistance, identify theft help and benefits, and more.
The caveat: In a subscription model like this, a customer will only see the value in that monthly charge if they can actually access and use the add-on services—easily, and whenever and wherever they want to. (Getting a discount at their favorite store through their bank subscription is valuable—but not if they forget to print out a paper coupon and present it to the cashier.)
That led Howard Bank to support its subscription-based service offering with a custom-built digital product: a mobile app. Once customers download the app, they can access their subscription perks through a single digital interface that seamlessly connects and responds to their physical world.
If their car breaks down, or if they drop their phone and crack the screen, they can use the app to call for roadside assistance or file a claim immediately. Plus, the app uses geo-tracking to show customers nearby deals and discounts—instant savings they can redeem immediately—at thousands of dining, shopping, entertainment, travel, and services locations.
Through its subscriptions, the bank saves customers money and simplifies their lives. It offers them a host of services for $7 to $15 a month, accessible from anywhere via a single digital, mobile hub—services that would be much more expensive to pay for individually, and much more frustrating to piece together and manage.
What’s Howard Bank get out of it? For one, the app increases the likelihood the subscription will become so “sticky” in customers’ lives, they’ll never cancel—the more they use it to access their discounts and services, the more they’ll see the value in their subscription.
And, in fact, by engaging customers outside of their banking needs, the bank itself becomes stickier in their lives—making them more inclined to use their Howard Bank debit cards and banking services. And, as a bonus: Howard gains access to customers’ location and app usage data, which it can use to target promotions, refine the app design, and build other customized digital products.
Venture capitalist Marc Andreessen wrote a decade ago that software was “eating the world,” and he was right.
So will subscriptions eat the world? It’s too soon to tell. But one thing is for sure: As consumers and businesses alike grow more subscription-curious, organizations should be considering what a subscription model might look like for them.
But while subscription revenue is more predictable than other sales channel revenues, it’s far from guaranteed. For a subscription model to succeed, it needs to be so sticky that customers can’t imagine their lives without it.
With a customer-centric strategy and a digital-first mindset, businesses can design a subscription experience that customers love. Data-driven insights will help you build—and keep refining—a subscription model that meets customers’ needs, while an integrated, frictionless experience will help customers maximize the value of their subscription. You’ll keep customers happy and hooked on their subscription—and keep those recurring revenues rolling in.
The innovation landscape is rapidly changing—and increasingly distributed
This is Digital, Episode 20: Can the Nation's Largest Utility Company Match Amazon's User Experience?