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The Most Powerful Model for Any Business: Subscription

5 minute read
Shep Hyken avatar
The moment you want a customer to come back, and they do, they have, in a sense, renewed their relationship with you.

Here's a business model utopia. A customer pays you, month after month, year after year. The money keeps coming in, and your customer base grows. That's the subscription model, and it is now available to virtually any type of business.

There have been several books written about the subscription model. I even featured it in a chapter in my book The Convenience Revolution. In addition to being a powerful revenue-generating business model, it also gives customers a level of convenience. They pay a monthly or annual fee, and their product or service continues. It's convenient for both the customer and the company/brand.

The subscription model used to be just for newspapers and magazines. Yet even decades ago, companies operated with a subscription model, and didn't even know it. For example, the telephone bill comes every month. Buying season tickets for a sports team each year. Paying an annual fee for maintenance of your copy machine or a large piece of machinery. All of these are subscription models and they apply to all types of businesses in any industry, both B2C and B2B.

Today we have the SAAS model (software as a service), which is the perfect example of a subscription. Microsoft figured this out years ago. When a customer subscribes to its software, they not only get the product, but also the ongoing updates that come with it. Most software companies no longer sell a physical product, as in a box of software. They sell a subscription.

Amazon, Walmart, Chewy.com and many other online retailers have subscription models that ensure their customers' products show up at the same time every week or month. And then there's streaming services (like Netflix, Hulu and Spotify), accounting services, legal services and even automotive services. Customers subscribe to routine delivery of groceries, razor blades, toilet paper and more.

Learning Opportunities

I recently interviewed Salesforce executives Alp Pekkocak, global head of industry and product marketing, media and entertainment, and Enrique Olives, director of product marketing, media and entertainment. They shared some very interesting insights about the subscription model. Specifically, they talked about what they refer to as Subscriber Lifecycle Management (SLM), which includes attraction, acquisition, service/care, ongoing engagement and retention/renewal.

While subscription is an exciting opportunity, it is becoming more popular, which means there are competitive challenges. You can't make a mistake. The secret to success is understanding and perfecting the five steps in the SLM. Let's give a little more detail to these simple, yet important, steps:

  1. Attract: If you want customers to use your product or service, whether it's a subscription or not, you need to get them interested in what you're selling. This is all about creating awareness and demand.
  2. Acquire: Once you've attracted the customer's attention, you want to move them to acquisition. You want them to buy, as in subscribe. Pekkocak preaches that in this step, you must make it easy. Often, customers subscribe online. The more information you ask of them, the more likely they are to abandon their purchase. Only ask for what you need. Once they become a customer, you can start to fill out their profile and understand more about them.
  3. Service (customer support): This is exactly what you think it is. Good old customer service. It's one thing to acquire the customer. The next step is the maintenance of that customer. This ensures that if they have any issues they aren't recalled as bad memories when it's time to renew. Sure, there will be problems and even complaints. It's the way they are handled that restores confidence for the customer to continue doing business with you.
  4. Engage: My friend the late Larry Baker once told me, "The most abused customer is a sold customer." Once they become a customer, you must let them know they made the right decision. A powerful "engagement process" is about creating a personalized experience for the customer and helping them get the most out of their purchase. For example, I recently worked with a health insurance company that calls its policyholders at least twice a year to share healthy eating suggestions, good workout habits and more.
  5. Retain: Next to the moment the customer decides to do business with you (Step 2: Acquire), this may be the most important stage. This is when they renew. It could simply be a repeat purchase, which is the customer renewing and continuing their relationship with you. Or it could be a formal renewal of a subscription. Either way, you must focus on retention. Know the profile of a customer likely to leave. Pekkocak shared a great example. Netflix is very proactive about retaining its customers and understands the profile of a "low usage" customer, who uses the service less than four hours a month and is more likely to drop their subscription. When they spot a "low usage" customer, they focus on Step 4 (Engage) and work to move the customer beyond the four-hour mark, which means they are enjoying their subscription. It also means they are likely to continue that subscription.

Final Thoughts

Salesforce's Subscription Lifecyle Management solution is really business 101. These five steps apply to any type of business. Even if you don't think you're in the subscription business, you are. The moment you want a customer to come back, and they do, they have, in a sense, renewed their relationship with you. So regardless of the type of business you're in, think of it in terms of a subscription model. Attract, acquire, service, engage, and finally, renew.