Subscription Economy Gold: Retention
The idea of the subscription economy is not new -- at least not to anyone who's familiar with the idea of software as a service -- but it's an idea that can sneak up on businesses. Many in the SaaS space started as more traditional vendors that saw subscriptions as simply a different delivery mechanism and a way to reach customers who couldn't afford massive upfront cash layouts.
However, thanks to a handful of evangelists -- like Zuora's CEO Tien Tzou, who delivered a speech Tuesday at the company's Subscribed conference -- businesses are starting to recognize that the subscription economy requires not just an adjustment to the way you do billing and financial record-keeping, but also changes to how you carry out many of your basic business tasks.
Keep Engagement High
Consider content marketing, for example. Most marketers see their content as a component of a sales funnel, leading readers toward being better educated, clearer on their needs and, ideally, more inclined to buy from the business providing the education.
As is the case with most sales and marketing efforts, the objective is acquiring new customers. That's important, but the subscription economy makes ongoing engagement and retention important too -- more important, in fact.
Adding customers in a subscription model transfers the upfront costs of starting a relationship from the customer (as in the days of on-premises software, for instance) to the vendor.
The on-boarding process, which may include plenty of hand-holding and professional services-type work, is the most labor intensive and costly part of the relationship for the vendor. Once the early stage of the subscription relationship is successfully concluded, the vendor's margin goes way up -- but only if the customer remains a satisfied customer.
A customer who may be dissatisfied with a subscription service or product is more likely to stop regularly engaging with it. One of the strengths of subscriptions from the customer's side is the ease of terminating a relationship -- and if a customer is no longer engaged with what you're selling, ending that relationship will seem like an easy way to cut costs.
For privately held SaaS software vendors, the average annual customer churn rate was 22 percent, while for publicly held companies it was 9 percent in a recent study by OPEXEngine. A high churn rate means you're doing all the expensive upfront work, but then missing out on the rewards of the long-term relationship. Reducing those churn numbers by a point or two means a major change in your bottom line.
That's why content marketing efforts can't stop the moment a subscription agreement is signed. They must continue in order to keep customers engaged and to make sure that they're always aware of the value their subscriptions are bringing to them.
Regular communications with customers are important. There are the obvious, blanket communications -- announcements, events and so on -- but the real benefits will come when you segment your customers and develop content targeted to each segment.
Using data in CRM, you should be able to create groups of customers with similar needs or markets. You also could group them based on how they use your products, or on their geographies, or by any other criteria you see as important. Or you could be really crazy and allow customers to identify the segments they belong to by polling them. Then, develop content specifically for those segments, and push that content to your customers at regular intervals.
"Creating more content for specific audiences" often gives CMOs and marketing vice presidents the willies -- they want to reach the maximum number of people with every effort. However, to win in the subscription space and reduce churn, you have to stop looking at the war and start focusing on the battles. If you're clever, it doesn't mean writing eight 10,000-word e-books a year.
For example, you can ask customers about ways they use your product to its best effect, or invite them to list their favorite features. Offer to make them the stars of a whitepaper or piece of content. Segment the responses. You can then generate several versions of a white paper, each version including real-life examples from a different segment of your customer base. Send the right version to the right segment and -- viola! -- segment-specific content.
This content shouldn't always be long-form stuff. Mobile and social media invite you to introduce shorter-form content. Short items like "Customer Tip of the Month," "Support Question of the Month" or "Partner of the Month" give you a chance to share valuable information with customers in 250 words or less. In the process, you'll be able to keep your customers thinking about what they're doing -- and better yet, what they could be doing -- with your products and services.
The subscription economy makes it critical that you don't go dark on your customers -- but the realities of the business world mean that you have to provide value in order to get past the noise and make sure you're heard.
Content that's self-serving, too sales-oriented or drenched in marketing speak is not going to work. Think about adding value for your customers. If you can help them do better, they'll be in business longer -- and that means their total lifetime value to you will be greater.