Salesforce Is Your Frenemy: 7 CRM Tips for Subscription Businesses

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Here at Zuora, my job is making sure our customers capitalize on all of Salesforce’s fantastic technology. And so though I’m a big, big fan of Salesforce—I worked there before coming to Zuora—I’d like to start this guide article by making a provocative declaration: Salesforce wasn’t designed for subscription-based businesses.

Yes, Salesforce has got amazing configurability. Yes, it generates insightful reports. Yes, it is a game-changer and one of the most powerful platforms on the planet.

But for subscription-based companies, every customer touch point affects all of your second-order revenue, which is where the bulk of your company revenue lies. Because of the data-intense nature of your subscription company, you need leverage Salesforce’s deep conversation and customization in a way that goes beyond its functional capabilities.

So with that said, let’s dig in and figure out how your subscription company can maximize your relationship with Salesforce and deepen your relationship with your customers.

1. Different products, different plans, different prices should be no problem

If you pull someone off the street and say, “Hi there! Our company sells products,” that person will totally understand what you’re saying. Then you say, “Well, actually, we also have prices for our products.” That person off the street may be wondering what your story is, but she’s still with you. If you then launch into an explanation of your 8 different plans and 24 different pricing schedules, my guess is your new friend has either started walking fast in the opposite direction or is looking at you with a very confused expression on her face.

That’s because unlike most standard businesses, subscription businesses are built on plans and features. We’re all pretty familiar with plans; we’ve known about those since we got our first cell phone. But let’s talk a bit more deeply about features because they are what most dramatically separate subscription companies from others.

Though you might have a physical product you’re offering, the notion of a subscription is a virtual one, and what you put into that subscription is largely virtual, too. You need a rich product model that lets you mix and match features according to what the market and the customer dictate, which is a radical shift from a traditional product catalog.

Salesforce’s product catalog is modeled on this traditional thinking and doesn’t lend itself to a product that has two prices. To deepen its functionality, you need a model with multiple layers to allow you to represent your products in all their complexity. And just as importantly, you need to be able to account for time-related things like what date the contract goes into effect, what date the service is activated, what date the customer accepts the service and agrees to be billed. These concepts need to be an inherent part of the system because time is an inherent part of subscriptions.
Combined with Zuora, Salesforce becomes the deeply functional subscription business CRM tool you need to manage your business. You’ll be able to apply price, quantity, discount, and subscription term changes in seconds.

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2. A refined, yet powerful way to nurture your customers

According to Forrester Research, companies that excel at lead nurturing generate 50% more sales-ready leads at 33% lower cost. But unlike traditional businesses, subscription-based companies make a lot of their money by nurturing their current customer base, not new customers. You know better than anyone that you don’t make your money on the first year’s cost. It’s the second or third year revenue that’s important. In fact if anything, it’s only when looking at the total lifetime value of the customer where you can actually say, “Okay, yeah, this actually pays for itself.”

So it’s the amendments—upgrades, add-ons, renewals, etc.—where you make your money in the subscription economy, and nurturing your existing customers is the surest way to success.

Of course, it’s always been easier to sell and increase your share of wallet with an existing customer than to find a new customer. Now subscriptions take this concept even further. In a one-time sale, you would have gotten all your money up front, so you don’t have to care about whether the customer was happy or not in his second year of using your product. With subscriptions, though, you care a lot about how happy your customers are in that second year.

If you’re using Salesforce, you have to get out of the traditional mindset of “new contract,” and develop an ongoing, 360-degree view of each customer. Does the product have the right features for that particular customer context? Is the customer on the right plan for their projected usage? Or maybe you’re not actually pushing the right products or your pricing is off or your product features are off. These are the things you need to focus on in the new subscription process.

For the upgrade and add-on processes, you need to be aware of the appropriate thing to recommend to the customer at every point in their journey with your company. Do you need to give them a discount to overcome dissatisfaction? What is the appropriate discount for a loyal customer? This can be especially complex in usage-based pricing, where the usage of the customer drives a lot of the upgrade conversion.

Renewals are another important time when customer nurturing is key. If you don’t have all your ducks in a row at the point of renewal, the customer churns. As you know, churn is very bad in a subscription-based business. It’s like a leaky bucket and you never catch up. This is why it’s so important to nurture your current customers so you can maximize your return on the upgrades, minimize the downgrades, and consistently earn the renewals.

Zuora for Salesforce helps businesses nurture strong customer relationships by providing a complete understanding of how the relationships have evolved in time. Beyond initial subscription sign-ups, your sales reps will be able to support the ongoing life cycle of upgrades, add-ons, renewals and more.

3. You need a real-time, 360-degree view of customer, 24/7

Hopefully by now, you’re convinced of needing a way to easily access your customer info—subscription terms, bills, payments, refunds, invoices and etc. No customer is willing to sit on hold for 10 minutes while you go on a hunt for the information, nor does anyone like to be transferred from department to department. One snafu of this type could cost you a lifetime customer.

The way around the problem is to have at-your-fingertips access to all of your subscriber information. Information such as what types of products and services a customer uses, whether a customer has any outstanding invoices, when did they last downgrade or upgrade, or even something as simple as what do they own and what does that say about them. Your teams will have much more success when they’re armed with the right data.

And this type of 360-degree view helps you way beyond customer management. For example, once you have this information, you could actually build something that lets you submit a customer’s billing account history, payments, refunds, and all of their other interactions with you to a credit agency, and the agency could actually give a credit assessment as to how likely that customer is going to pay.

With Zuora for Salesforce, you’ll be able to provide your sales and service teams with this type of up-to-the-minute information on key subscriber activity, including invoice, payment and refund histories, and more.

4. You must be able to master multichannel

Multi-channel is a big buzz word right now, but in this case, there’s a reason for all of the hype. That’s because there has been a massive increase in the number of channels and number of interactions you need to support to thrive. To succeed today, you have to reach your customers whenever and wherever they want: web, mobile, in-person, on the phone.

I like to say that if your customer wants to give you money, let them! This isn’t just good for your customers, it’s good for business. If a customer already knows they want to upgrade their service and can log on to your site and do it themselves, then you’ve just saved your reps’ time and resources.

A less common reason multi-channel is so important right now, especially in B2B, is because of partner reseller networks. Salesforce makes partner management very simple, allowing you to share leads between your partners—which makes everyone happy. Combined with Zuora, you’ll be able to service those leads effortlessly because it sorts out all of the complex billing relationships and eliminates the “who owns what?” and “who should go to whom?” questions.

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5. Tame subscription billing complexity

With subscription businesses, dirty looks from your finance team are more common than you might think. That’s because billing is exponentially more complicated than in traditional businesses and these complexities drive them nuts. A customer signs up for one plan at one price for three months and then a couple of weeks later does an upgrade, and then a downgrade but then has to pause their subscription, and then they want to restart at 3pm Tokyo time in a leap year—it’s enough to make your head spin, and, sadly, it’s not uncommon. You’ve got to be ready for anything your customers throw at you.

On the reporting side of subscription finance, the complexity continues. Subscription metrics, like MRR or monthly recurring revenue, help you measure your predictable revenue of your recurring subscriptions. But when you’ve got so much flux over a period of time, it can be hard to chart MRR accurately. If you’re not asking the question of “when?” in relation to your metrics, then you’re not asking the question correctly.

What about the dreaded churn? Some companies define churn as numbers of customers that actually leave them. But churn can also be defined in other terms, like, for example, downgrades. The trick comes in how to report that churn. What’s the dollar value of a downgrade? Or even more tricky question: what’s the value of a downgrade over the life of the subscription?

When integrated with Salesforce, Zuora offers a sophisticated, yet easy-to-use billing system that is ready and able to handle these types of complex transactions without breaking a sweat. Prorations, calculations, and even revenue schedules are automatically calculated for you.   Plus, your teams can see the full financial impact of a quote with real-time subscription metrics like discounts, MRR, and total contract value (TCV).

6. Keep your front-office and back-office in sync at all times

It’s a fact: subscription companies generate more bills, more payments, and more transactions of all kinds. And while we’ve been talking a lot about keeping customers happy by having up-to-date information at the ready, your front-office and sales teams need this information just as much. Your sales teams are out there working hard, getting sales and bringing home the bacon for the company. Your billing and accounting folks are making sure you meet audit requirements and that the reporting is ship shape when they go to senior management.

These two worlds are very hard to reconcile, but as a company you have to do it. To borrow a term from supply-chain analysis, there’s bullwhip effect at play here that can wreak havoc on your company. The bullwhip effect says even small changes in your upstream systems—how you’re selling, how you’re structuring your product pricing and what you’re pushing—start to have larger and larger effect on downstream systems. Eventually, the “whip” is so big, it’s very, very difficult to change anything and your systems start breaking with the smallest touch.

We’ve always built our system to avoid this bullwhip effect. Zuora for Salesforce has real-time sync and configurable sync to help every transaction stay aligned in multiple systems so that your sales and service teams are always on the same page as your billing and finance departments.

My last piece of advice here is straightforward, but crucial: you should bill customers and recognize revenue based on how and what you want to sell, not sell based on limitations in your back office. Many large companies make decisions because of legacy systems that aren’t able to handle the complexities that we mentioned before, but that doesn’t mean you should necessarily be doing business with your customers that way. Think about how you want to sell and then acquire the back-office alignment to enable you to do just that.

7. Make sure you’re set up for the long run

Okay, so we’ve established that there are a lot of complexities for subscription businesses. And we know you wouldn’t be reading this article if you hadn’t already faced at least one of them. But we have one last piece of crucial advice for you: you have to think about the long run for a subscription business.

“But wait,” you might be saying. “Sure you’ve outlined a lot of complex things here, but you know what, our business just isn’t that complex. And by the way, Salesforce is fully customizable, so I can probably build system like this myself.”

You can, of course. We know Salesforce is a great product. But hopefully I’ve convinced you that subscriptions are a fundamentally different business model. And as your subscription business becomes more sophisticated over time, it gets exponentially more difficult to manage. In order to scale, you need to be aware of where you think the company is going to go.

For example, the pricing you have today may not be the pricing that you adopt in the next two or three years. Or if you have 50 reps today, in a few years you might have 500 reps across 10 different countries. To really set your business up for a future that promises to get even more complex and aims to be more customer-centric, it’s crucial that you have a system that’s been built from the ground up with the subscription concept in mind and allows you to scale.

So we invite you to think deeply about where your company is today and where you want it to go. Because if there is one constant that I’ve seen in my enterprise software career, it’s this: companies change and your software needs to change along with you.

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