Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

by Tien Tzuo

Anything you do on your website, a competitor can steal pretty easily. But you can actually create really cool experiences in stores. Experiences that can’t be found anywhere else.”

After a little market research, of course, they found out that the opposite was true—more people research online first, then head to stores to try out products before they buy them.

Tesla dealerships aren’t huge lots of cars swarming with salespeople working on commission. The point is to inform and answer questions. If you like the car, you can take care of the transactional stuff online.

b8ta, a retail store that sells trendy tech gadgets, doesn’t make any money from product sales. Its business model is entirely based on paid subscriptions from the product vendors themselves, which keeps it laser focused on boosting their return on investment.

They get the music, they get the downloads, but they’re also investing in a larger experience, which is the community of subscribers themselves. The question was how do we make them feel more like members, and less like customers?”

They allow them to give their customers what they actually want—the outcome, not the product.

Nobody pays for the search itself. But everybody knows that Google profits on you searching.

Ownership is dead. Access is the new imperative.

Once customers can get the outcome they want, without having to worry about owning the physical assets, that’s where the demand goes, and that’s where new revenue streams are created.

“Marketing is no longer just about getting to the sale. To keep subscription customers renewing and re-engaging, you have to provide real value and solve problems.”

The problem is that today most manufacturers don’t own the customer relationship—the channel does.

Brands are still important. But these days, they are increasingly communicated through experiences.

As a result, storytelling has come to the fore. At Zuora, we use the Three Rooms mental model of storytelling. You need the story of your product—the how. You need the story of your market—the who. But most important, you need an overarching story that puts your service and your users within a broader social narrative—the why.

Ideally you’ll take advantage of both levers, pricing and packaging, because what they essentially represent is increased adoption (consumption-driven) and service innovation (capability-driven).

Instead, they want to hear about two things. First, what are the broader implications for my job and my business if I go with you? Second, and perhaps more important, what are other people out there doing?

At the end of the day, sales is about growth—you’re selling a service in order to help your company grow, and your customer is buying a service in order to help themselves grow.

In today’s world, you have three new imperatives: acquire more customers, increase the value of those customers, and hold on to those customers longer.

No contract length, however, will ever outweigh an utterly maniacal focus on keeping customers happily surprised on a regular basis.

According to McKinsey, if a software company grows less than 20 percent annually, it has a 92 percent chance of failure. Because at the end of the day, it’s grow or die.

Businesses are starting to ask questions that IT can’t answer. Why? Because the foundational IT systems of these businesses are based on stock keeping units (the identification codes assigned to product lines), not subscribers.

Subscription cultures are about making sure your customer continues to succeed with your service over time, and translating that ongoing value into revenue.

Once upon a time, we used to know the people we bought from—the butcher, the baker, the blacksmith, the farmer. We used to know the people we sold to, the neighbors in our village. All that knowledge got lost a long time ago, when the Industrial Revolution ushered in the product era. But it’s coming back in a big way. And in the process, we’re getting rid of a lot of stuff we never really needed in the first place—planned obsolescence, the landfill economy, the whole concept of ownership itself.