Zuora's Amy Konary on why subscriptions are win-win
Feb 2 2021
Let me take you back. It’s 1875 in rural Utah. You’re part of a small one street town that has one general store for miles. You’ve got no other options to buy supplies except this one little store. The store owner sets the price and he doesn’t have to do anything to convince you to come back, because you have no other choice.
Let’s now fast forward to New York in 1956. There’s a store on every block for what you need. Department stores dot the skyline, peddling discounts on everything you can think of trying to convince you to come to their store for the same product that the other store has right up the block. There’s no relationship. There’s just the discount.
Neither of these scenarios were sustainable. If a business has all the power, the customer loses. If the customer has all the power, the business loses and by the business losing, the customer eventually loses, too.
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Now enter the subscription—the first commerce model in the history of business where the relationship is with the customer is baked directly into how you make money. It’s an equilibrium. The customer doesn’t need to pay a bunch upfront because she can use the product over time, and as long as she continues to value the product, she keeps paying. The business doesn’t need to continually win her patronage. Yet, if the business aggravates the customer or stops providing value, she’s gone. She's churned.
No other commerce model aligns customer and business incentives quite as well as the subscription. And I can’t think of a better advocate and professor of subscriptions than Zuora’s Amy Konary.
She founded the Subscribed Institute, a dedicated think tank focused on the challenges and opportunities of the Subscription Economy. Prior to that, she made a name for herself educating the subscription world at IDC and today, she’s the perfect person for breaking down the relationship and customer experience piece of the subscription world. She’s one of the deepest thinkers I know, and she gives us her thoughts and lessons, so keep reading or start listening.
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Here we summarize the main takeaways for you to implement or hand off to your team for implementation.
What is the Subscription Economy?
The term "Subscription Economy®" was originally coined by Zuora's CEO, Tien Tzuo. It defines a new era of companies and business models with a new imperative—turn your customers into subscribers. Doing this will establish a mutually beneficial relationship for everyone involved.
Why is it important?
The Subscription Economy® is important to understand because it affects the way businesses market, operate, and sell their products and/or services. Customers have changed—they have new expectations and they’re looking for new ways to more personally engage with businesses.
As Zuora explains, "At the heart of the Subscription Economy® is the idea that customers are happier subscribing to the outcomes they want, when they want them, rather than purchasing a product with the burden of ownership."
Discuss your current business model with your exec team.
Schedule a time to evaluate the success or failures of your existing business model. This includes understanding the service/product you're providing, your value, and your customers, etc.
What to do next quarter:
After assessing your current business model, determine whether the business model built on recurring revenue is a better way to run your business. If your business is already built on a recurring revenue model then you may have discovered some holes within your model during your review and evaluation process. This is a good time make some improvements.
Numerous companies have come to the realization, especially after the year we had, that a business built on a recurring revenue model is a better way to run their business. Traditional methods of running a business no longer, if ever, guarantee success. And according to Zuora, there are four critical values, companies must understand and operate around:
Developing deeper customer relationships versus selling one-time transactions.
Establishing dynamic, value-based pricing versus fixed, cost-plus pricing.
Delivering efficient, consumption-based services versus shipping unit after unit.
Measuring and reporting predictable, forward-looking revenue versus backwards-looking financial statements.
As businesses make the move to the subscription model, they're needing some practical guidance on how to do it right. Zuora researched and tested against hundreds of companies and identified nine core processes that help their customers with: price, acquire, bill, collect, nurture, account, measure, iterate, and scale. The following nine processes represent the nine keys to success in a subscription business.
Begin implementing and perfecting the nine key processes demonstrated above, according to your business, and closely evaluate the output. There's no easy way to make the shift from a traditional business model to a subscription business model, just as there's no quick way to make adjustments either. But getting it right is well worth it as you begin to scale your subscription business.
Who should own this?
Business leaders looking to make the shift into a subscription business model, as well all of those involved within each of the nine key processes above.
This idea that you’re not just having transactional relationships with your customers anymore, you’re building ongoing relationships around outcomes, is hugely impactful. - Amy Konary
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Next week, we've got TripAction's CMO, Meagen Eisenberg, educating us on SWOT analysis.
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This is a ProfitWell Recur production—the first media network dedicated entirely to the SaaS and subscription space.
By Patrick Campbell
Founder & CEO of ProfitWell, the software for helping subscription companies with their monetization and retention strategies, as well as providing free turnkey subscription financial metrics for over 20,000 companies. Prior to ProfitWell Patrick led Strategic Initiatives for Boston-based Gemvara and was an Economist at Google and the US Intelligence community.