Excerpt from Zuora CEO Tien Tzuo’s national best-seller SUBSCRIBED: Why the Subscription Model Will Be Your Company’s Future — and What To Do About It.
Subscriptions are obviously great for perishables and repeat purchases: razors, diapers, groceries, detergents, pet food. But what if you sell more expensive products but still want to take advantage of the kind of subscriber relationships that those monthly box services enjoy? Well, you wrap compelling digital services around them. Fender is a great story here. They’ve been making amazing electric guitars for more than seventy years. But sales of electric guitars, industry-wide, have fallen by about a third in the last decade. And while almost half of Fender’s sales are to brand-new guitarists, and 90 percent of them quit the instrument within a year. From a subscription busienss’s point of view, that’s a 90 percent churn rate!
That’s largely because guitar is “a hard instrument to learn,” explains Ethan Kaplan, chief product offcer—digital for Fender. It may be pretty easy to pick up a few chords, but most beginning guitar players tend to plateau after that, eventually abandoning the instrument entirely. But if he can keep people playing and reduce that churn, Kaplan knows that most of them will remain customers for life. Cutting abandonment rate became a key priority, and solving for that meant thinking beyond a “connected guitar.” So Fender launched a new subscription-based online video teaching service called Fender Play, which teaches guitarists to perform their frst riff or song in a half hour or less. (I’m a fan—so far I’ve learned three open string chords: C, D, and G. Let’s hope I don’t plateau.)
“We did a segmentation study to really understand our audience, and we used that as the nexus point to develop the digital strategy,” Kaplan explains. The success of Lynda.com, the subscription-based training website, also helped convince Fender there was a market for Play’s premium content. Fender Tune, a free mobile app for guitar tuning, was Fender Digital’s frst product offering in August 2016. Tune helped clear the way for Play—and helped Fender get up to speed on harnessing vast amounts of consumer data. “I can see minutes spent [on Tune], how many people are tuning, what they’re tuning, if they’re successful,” Kaplan says. Before launching Play, Kaplan’s team spent a year building its data analytics and dashboards for real-time insight across Fender’s digital products. “Having a continual dialogue with our customers through learning is really key,” Kaplan says. “I don’t want to just sell people guitars and then hope they play it.”
Fender CEO Andy Mooney, who incidentally closed our 2017 Subscribed conference with an amazing cover of “Layla,” says that by simply reducing his abandonment rate by 10 percent, he could double the size of his market. That’s a really compelling example of someone applying a service-oriented mindset to an ostensibly “static” product. Instead of thinking about reseller margins and unit sales, Mooney is thinking about subscriber bases and engagement rates. It’s not about owning a guitar, it’s about being a guitar player and a music lover for life. “Leo Fender actually never played guitar,” said Andy. “But he listened to artists. At Fender we still believe in listening to our customers.”
Order your copy of SUBSCRIBED: Why the Subscription Model Will Be Your Company’s Future — and What To Do About It now!