The global marketplace has evolved in recent years, becoming more utility-based than ever before. The rise of the subscription economy has been one of the major developments to illustrate this change.
The subscription model, under which companies shift from selling products to selling services, has many advantages over traditional business models. While the trend was initiated by business-to-consumer (B2C) companies, the subscription-based model is now being adopted in earnest by many business-to-business (B2B) enterprises.
The Emergence Of The B2B Subscription Model
Simply put, the subscription model allows customers to pay periodically for the product functionality they need without having to buy products in full.
Today, with the rise of the on-demand economy, many business customers have come to expect anything as a service (XaaS). Subscriptions make it cost-effective and efficient for businesses to access resources without having to invest the capital to own them outright. It promotes agility and positions businesses to leverage the rapidly advancing world of technology.
Subscription models can be equally alluring to B2B services providers. By investing optimally, you can provide high-end products to your customers for a periodic subscription fee, ensuring consistent revenue and recovering investments steadily. Rather than chasing one-time sales, this model allows you to bring in a predictable, stable revenue in each billing period.
However, subscription models can be tricky to implement. In subscription-based sales, deal sizes are smaller and they typically accrue only a fraction of the lifetime revenue in the first year. Customer acquisition costs can be significantly higher than that of customer retention costs, so it pays to ensure continuous value delivery to minimize churn and maximize customer lifetime value.
How Does Customer Success Work?
As an organization looking to implement CSM, you need to focus on key functions such as insightful workflows, customer health assessment, engagement planning and continuous improvement. The right strategy is essential, for which you need to understand your customers’ business objectives and desired outcomes. Ideally, you should categorize accounts based on priority, health and potential to grow, and create customized success plans as required.
Standardized engagement processes come next, as you need to develop the best practices for customer success across the customer life cycle. You should leverage customer data from sales and service functions and use analytics to identify critical insights for your CSM programs.
Hiring resources with CSM capabilities and arming them with the right tools can help achieve the desired customer success results. And whether you choose to work with a specialized services partner or develop your customer success team internally or even go in for a hybrid approach, it’s important to define goals and expectations and prioritize the strategy, development and delivery of your program. Once implemented, timely insights can help you validate existing programs to ensure they deliver maximum value and also prepare for future initiatives.
There are, however, some challenges when it comes to cracking the customer happiness code. While analyzing your customer journeys, you cannot overlook customer education. When customers don’t know how to use your product to its full potential, they’re far more likely to have a negative experience. Furthermore, a lack of engagement with specific customers is another challenge that can lead to incorrect churn predictions. There are times when customers become “invisible,” and you must have a proactive playbook in place to identify them in order to minimize churn.
While the subscription model has several advantages for B2B enterprises, including consistent cash flow and increased business resiliency, it also offers subscribers a chance to use high-end solutions without having to pay in full for them upfront. And while challenges do exist with the subscription model, organizations that implement customer success programs can ensure customers receive maximum value from solutions. When this is executed well, in-house or with the help of a services partner, it can lead to reduced customer churn, increased annual recurring revenue and a rise in customer lifetime value.
A Good Customer Experience Is Imperative
At CSS Corp, we work with a variety of companies that offer subscription-based services, and we find that customer loyalty must be won daily in the subscription economy, as revenue is staggered over time instead of being front-loaded. To achieve success with the subscription model, a business must focus on the following key elements:
• Guarantee periodically recurring revenue.
• Optimize product acceptance and adoption rates.
• Minimize customer churn.
• Maximize customer lifetime value (CLV).
• Increase account expansions and renewals.
All of the above come under the purview of the customer success function, which I believe is fast emerging as the key to fueling growth in the subscription economy. Customer success management (CSM) enables your customers to attain the value they expect from your product or service. In turn, it helps you deliver value consistently, maximizing customer retention and generating more recurring revenue.
Customer success strategies can help you increase repeat transactions by cementing long-term relationships with your subscribers. Common functions include:
• Managed onboarding and long-term account health.
• Strategic initiatives to maximize product adoption and advocacy.
• Reduction in churn by proactive monitoring and optimizing customer health and behavior.
• Boosting customer lifetime value through seamless renewals, active life cycle management and ongoing value addition.
• Account expansion by upselling and cross-selling to customers most likely to convert.
This article was originally published here.