How does the subscription economy change customer engagement strategies?by
Adapting to the subscription economy takes more than just deciding to sell subscriptions. It becomes crucial to understand the factors affecting customer success in order to boost customer retention.
The last ten years has seen a surge in the subscription economy, with businesses across the globe adapting their operating model to take advantage of the opportunity to accrue long-term revenues. The stats speak for themselves – according to McKinsey the subscription e-commerce market has grown by more than 100% percent a year over the past five years, and Zuora’s bi-annual Subscription Economy Index outlines that subscription businesses are growing revenues about five times faster than S&P 500 company revenues.
As author Tien Tzuo has said, it’s the very best economic moat going. A competitor can copy your product’s exact features, but they can never copy the feedback you get as a company from an engaged and loyal customer base.
However, adapting to the subscription economy takes more than just deciding to sell subscriptions. You’ll have to reinvent your company from the inside out. It’s everything from how the company promotes itself, what it’s like to deal with digitally, how it can create ongoing, delightful experiences for subscribing customers, and how to generate ongoing word of mouth.
By shifting to a subscription business it also becomes crucial to understand the factors affecting customer success in order to boost customer retention. Practical customer success strategies need to be devised and established to ensure customer experience remains excellent throughout the customer life-cycle.
The service wrap
It used to be received wisdom that ‘a good product speaks for itself’. You don’t hear that so much nowadays. Why? Because the product alone contributes a diminishing proportion of the overall lifetime value from each customer. Products used to be designed, manufactured and then delivered to customers in a single, linear chain. The subscription economy changes all that – it becomes circular. Today the product only accounts for so much of the value that a customer perceives and is willing to keep paying for. The rest is ‘service’.
Deciding to differentiate your product in terms of service is by no means straightforward. It invariably requires cultural change as well as an organisational evolution. But in many instances, businesses can gain faster market traction – and make more of a difference to customers.
Service enables distinctiveness and authenticity. Brands achieve differentiation via the distinctive value or ‘personality’ of their service experience. Consumers deepen their engagement with the growing subscription economy where everything is a constant experience and providers’ products are constantly updated.
Customers love the sound of Sonos
There are plenty of examples where businesses have grasped the opportunity to deliver a service that is an experience, rather than a commodity. Take Sonos, who have succeeded in capturing significant global market share and a great reputation through an awesome combination of product and service.
Sonos is the wireless home audio product that gives users great flexibility and control over listening to their media, at very high quality. But the product is only half the story. Whether you’re visiting one of its boutique, experiential stores, cruising the website or phoning up its award-winning tech support, Sonos is extremely focused on maximizing the customer experience.
The accent is on wanting to help customers get the very most out of their Sonos purchases, rather than nakedly trying to make more sales. Customers love the Sonos product, and that counts for a lot in terms of the overall value mix.
Throughout the customer lifecycle – trying out, buying, getting used to how it works, living with it for potentially years, and then looking to replace – service plays an increasingly dominant role. The product is not just physical – it is a blend of the physical unit with the Sonos app, the Sonos Alexa skill, future updates and usability, the support and the service all rolled into one.
In other words, while the product itself contributes a fairly static and predictable level of value, the way that Sonos uses its customer service/support delivers two streams of fluctuating value: one that seeks to address and anticipate customer questions and requirements – thereby delivering high levels of satisfaction – and another that collects and analyzes real-time feedback so that the business learns how to improve its product and service proposition – thereby safeguarding additional LTV.
All the market insight teams of these businesses had recognized that customer lifetime value is directly affected by surrounding service factors, and that getting data on this performance was a critical dimension on their research.
For example, where and how you drink a brand of beer will affect if you buy a second one. The beer might be fine but if it was in a dirty glass, or they forgot the orange slice it’s marketed with, or if the waiter that served you the beer was rude, it colours the experience of the product in your mind. The data also helps hone best practice to encourage customers to enjoy/ share/ champion the product.
Insight is crucial to help you convert from creating sales to creating fans. A true fan is someone who will likely buy from you no matter what you next produce. Who will not just recommend you but evangelize about you. In other words, customers whose faith you have earned. These types of customers have a huge role in play in business growth and should be developed and nurtured at all times.
Glossier, which has recently reached unicorn status, is a fantastic example of a company that has got this right. Since the outset, the company has used reader comments, suggestions and feedback – gathered on the blog and social media – to drive product development. Taking that feedback-driven process and turbo-charging it, Glossier now spans continents and boasts a huge range of products beloved by a global customer base.
Of course, receiving and actioning customer insight is no mean feat. Back in the day, people would go around with a clipboard, or mail out surveys in the post. Now they are emailed. Basically a paper process that’s been digitized. But customers have changed. Huge percentages of customers only read their email on their phone, so online surveys aren’t the answer either.
Technology is allowing businesses to get closer to customers in real time, as they interact with their products and services. Leading brands like Amazon, Uber, Reed and Selfridges have spotted this trend. They need customer feedback to keep delivering the right service to their customers.
But with customers increasingly ignoring surveys, they’ve had to change how they get that feedback, so they are opting to get short feedback across interactions, which gives them fantastic insight across the customer journey.