The Subscription Business Model: Extracting Value from Relationships

By Erika Malzberg September 22, 2016

Recently, Cyril Perducat, EVP Digital Services for Schneider Electric sat down with us to discuss how Schneider Electric is transforming their 180 year old business.

Read the Schneider Electric customer story here or check out the video:

Here are some excerpts and highlights from this fascinating discussion with an established business that knows that they need to continually innovate to avoid disruption.

Customers Want Outcomes

When I look at the evolution of our customer needs, the starting point is that our customers want outcomes; they want a joint commitment on a certain outcome. And the right business model to transact the value for this is subscriptions.

A very important point for us in the subscription business is a way to change our relationship with our customers. What is very interesting with subscriptions is that you are live with the customer 24/7; you are permanently in a relationship with your customer.

The right business model is based on an outcome, but also the need for the customer to have a different type of experience.

Customer Relationships: Delivering and Extracting Value – It’s More than Just Recurring Billing

The profound change of a business is to measure opportunity to create more value, to transform the experience, and the relationship we have with our customers, and really unlock a large amount of value that is trapped today. How do you extract, in the right way, the value out of all those relationships?

Every department and every element of the organization has to be perfectly aligned because the frictionless unique experiences we want to create for our customers are based on this continuity of experience across all the different departments.

If I look at subscriptions, we get much more touchpoints, much more information about the behavior of the customer. It’s an opportunity for us to fine-tune the value we deliver to the customer, to personalize this value, to be able to create different experiences for different customer use cases.

Customer Retention

Customer retention at the very eye level is paramount because if you spend money to acquire customers but you lose them as fast as you have acquired them because you didn’t provide the right experience, it’s only going to make business models that do not scale at all.

Making the Shift to Subscriptions

Moving to subscriptions, I think a fundamental aspect is the parallel we need to do between the technology innovation and the business model innovation. And that’s a very interesting area for us because it’s about changing the experience of the customer, it’s part of our culture and the transformation of our industry. Connectivity, sensors, software, have always been part of our DNA in terms of evolving our business over the years.

I think Zuora offered us more than other players within the space, because it offers not only technology but also learning experience. Being a central point in the subscription economy, being able to gather onto a platform, all the capabilities that multiple industries need, this is important for us. Zuora is an enabler of our transformation beyond just technology.

We want to continue to be a pioneer; we want to continue to be a leader.

Learn more about shifting an enterprise business to a subscription business model: How to Shift an Enterprise Towards a Subscription Business.