Transitioning to a Subscription Model: How to Make the Leap

Transitioning to a Subscription Model: How to Make the Leap

Kevin Harris PicBy Kevin Harris, Marketing

 

By this point it’s no secret how many businesses are transitioning to subscription models and one COO argues it’s becoming risky for companies not to make the leap. Yet many business leaders don’t know the keys to starting and running a successful subscription business, making the change from a traditional model a little scary. In fact just last week I was talking to a friend who runs a catering company, and he mentioned they’re considering a new subscription option but had some concerns and didn’t really know where to begin with preparations. So I sent him the link to Zuora’s new eBook and recommended he read Gray Chynoweth’s article entitled, “[Your Business] as a Service: Developing Your Subscription Business Strategy.”

 

As a veteran lawyer who is now the COO of Dyn, Chynoweth’s piece is quite persuasive in highlighting the benefits of being a part of the Subscription Economy. In addition to increased efficiencies for customers, Chynoweth emphasizes the new market and retention opportunities that arise for businesses. While you’ll have to be willing to give up some money on the front end, Chynoweth offers assurance that with recurring revenue, the margins are more profitable in the long run.

 

GChynoweth PicBut Chynoweth’s most important tip for subscription companies is to build a lasting, positive relationship with clients and always do what’s in their best interest. Chynoweth speaks from experience as Dyn chose to develop a pricing model that benefited their customers first and foremost by offering them predictability and no hidden fees. Not only are customers happy, but the Infrastructure-as-a-Service company has seen less churn and a longer customer lifetime value (“CLTV”). By focusing on long-term customer relationships rather than immediate profits, there are also more opportunities for upsells.

 

The COO not only lays out the benefits of joining the Subscription Economy, but also offers a range of steps for businesses to take if they’re ready to make the transition. First and foremost, it’s necessary to understand and utilize the metrics that are unique to companies with a subscription model. “And be aware upfront that typical sophisticated accounting systems don’t provide these metrics,” Chynoweth writes. Dyn specifically needed a better way to track churn so they “invested in a subscription billing and management tool to address this complexity,” according to Chynoweth. He goes on to detail the other specific metrics to consider as well as “five key considerations” to help new subscription companies develop the right strategy for their market.

 

Accelerate Book Cover PicChynoweth’s article certainly answered a lot of questions and concerns for my friend in the catering industry and now it sounds like they are seriously considering moving ahead with their plans for offering a new subscription model. So if you’re looking for some inside expertise on running a successful subscription business, sign up for Zuora’s new free eBook and find out what Chynoweth’s “five key considerations” are while learning more about Dyn’s journey in the Subscription Economy. In addition to Chynoweth’s article on page 68, there are also 15 other articles about how to succeed in the exciting Subscription Economy.

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