Subscriptions have soared over the past few years, with the pandemic only accelerating the popularity of recurring revenue models and deeper customer relationships. And the Subscription Economy isn’t just a movement led by Netflix, Spotify and Amazon Prime; it covers almost every aspect of our lives, from the methods by which we get our food (think HelloFresh) and razors (Dollar Shave Club) to the ways we access news and digital content.
But the shift from one-off to recurring purchases is not without its difficulties. For subscriptions, the client relationship continues far beyond acquisition, and most companies fail to make a profit on a client until they have stayed on a service or product for multiple months. It’s the complexity and the extended duration of the subscriber lifecycle that makes an efficient TechStack so crucial to a subscription businesses' bottom line.
That’s why Subscription Insider invited leading voices in the Subscription Economy to shed some light on the importance of technology in the ever-evolving industry, with their tips for how to get it right. For those that didn’t make the conference, here are our top 3 takeaways from last week’s Subscription Boot Camp: TECHNOLOGY!
Systems, Systems, Systems
Subscription revenue models differ from traditional one-off purchases and so, naturally, the TechStack looks very different. Most subscription businesses aren’t profitable on the first purchase since customer acquisition (CAC) and onboarding costs are paid upfront but the total revenue of the customer over its lifetime (LTV) is paid in installments. This means that for subscription profitability, retention is everything, and anything that turns a customer away is to be avoided at all costs.
Kim Terry, Partner at Laventa Partners, spoke to this issue of churn management for e-commerce businesses, but the same theory applies to the digital publishing space. For news and media companies, access to your content is ‘the product’, and a constant alignment of value through personalised experiences is the only way to keep customers coming back for more.
The only way to repeatedly cater to your customers post-acquisition, and create long-term, profitable relationships at scale is by building systems, and using the right technology at every stage of the subscriber lifecycle. This is easier said than done: a report from Lineup and NAPCO found that 68% of Publishers are focused on increasing subscription revenue, but that 92% found general technology challenges as a barrier to doing so. This disparity between the willingness and ability of CTOs to implement technology that manages the subscriber experience is holding back many companies from building and testing user experiences at scale.
The message is clear: find the tech, build the systems, reap the rewards (over and over again).
Don’t forget the ‘boring’ bits
Sometimes the most valuable part of your TechStack is the least exciting. Whilst we tend to focus on the tools that help with lead generation, acquisition and conversion, the small but important section after sale, before product delivery, is crucial to your bottom line.
Melanie Stout, Partner at Paul Larsen Consulting (PLC), spoke to the ROI of getting payment and billing technology right. Seamless checkout, billing and delivery (which in the case of digital subscriptions is access to the content) is paramount to stop customers falling through the gaps, and has a massive effect on your profitability. Any hiccup at this stage can cost you a customer, creating an automatic loss on that individual user.
Audit your billing and payments processes regularly to make sure you’re not losing potential and current customers due to avoidable, technical issues.
Avoid buying tech for tech’s sake
Perhaps surprisingly for a conference about technology, there was consensus amongst our experts that ‘too much tech’ is a very real thing. Scott Howland, our very own Global Director here at Zephr, raised the point that every software in the Martech 5000 will claim to help you hit your KPIs, but that doesn’t mean you should (or even could) look to use every single one.
Instead, it's important to build your TechStack according to your goals, working backwards from the outcomes you want to the capabilities you need, before finally deciding which solutions you require. Doing so means that every tool in your TechStack, from CRM to analytics, adds genuine value, and is likely to be used more effectively.
Another way to look at it is to break down the customer journey, say into acquisition and retention, and pinpoint the value exchange at each stage. Making your TechStack fit with your customers, not the other way around, ensures you are offering a service that your subscribers actually need, rather than overwhelming them with features just because you can.
At an important time in the industry’s development, the team at Subscription Insider brought together a panel of experts to talk about the pressing issues and trends of the Subscription Economy: the importance of retention and seamless UX to profitability; the rise of tech tools that do just about everything; and the difficulties and complexity in putting these solutions to best use.
What’s clear is that the importance and ubiquity of software that has the power to turbocharge subscription models is only going to increase. CTOs and CIOs across all subscription businesses need to accurately sort through the list of platforms out there with a fine comb, avoiding those that add extra complexity with little benefit and doubling down on those that help simplify and refine business processes, ultimately adding value to the subscriber experience.
Looking to manage the entire subscriber lifecycle from an easy-to-use central hub? Get in touch!