It seems like everything is available by subscription these days: razors, bacon, clothing, beer. It's clear that the subscription market has moved well beyond the local kid tossing the newspaper on the stoop every morning. But just because it seems like everyone is doing it doesn't mean everyone is doing it well.
Without a doubt, there is a lot of upside to the subscription model and recurring revenue is just part of it. For many types of businesses, subscriptions offer an opportunity to develop deep and lasting relationships with consumers that will pay off big.
Author Robbie Kellman Baxter coined the term "Membership Economy," in 2014 with her book of the same title. Her experience with companies ranges across SaaS, media, consumer products, retail, and community organizations. Her clients have included start-ups and mid-sized, venture-backed companies, as well as established industry leaders such as ASICS, Netflix, Electronic Arts, Microsoft, the NBA, and The Wall Street Journal.
In her new book available this April,The Forever Transaction, Baxter takes readers through every step of the subscription business process so that they can not only build a viable offering but-- even more importantly-- forge strong customer relationships.
The "forever transaction," which she defines as a relationship that drives value for the people you serve, is no quick fix. That said, Baxter offers a strategic approach from initial start-up or testing of a new model, to scaling the operation for long-term growth and sustainability, to revamping your culture so everyone works together to optimize customer lifetime value.
According to Baxter, anyone can transform their business and figure out how to offer a "forever transaction." Mind you, doing it will not be easy. Based on Baxter's work, here are five questions you'll need to answer to get an accurate idea of the work ahead:
1. Do you have buy-in from the top?
You absolutely must have C-suite champions to move ahead. Leaders must allocate resources and track the right metrics. No factor is more critical to your success.
2. What about a strong team lead?
Many membership models fail because the organization lacks a strategic lead envisioning the big-picture dependencies instead of focusing on operational tasks. Sometimes when you do one thing, it impacts your ability to take the next step; one goal depends on another. Someone must foresee those dependencies. A team lead with credibility, seniority and a strategic orientation will be a game changer.
3. Do you know who your target customers are? And how much do you know about them?
Your best customers (best members) are the ones you'd like to replicate. They pay on time, use your products regularly, get great value for their investment, and refer others to your organization. Customer understanding is critical as you begin to build a successful offering.
4. How sophisticated is your technology footprint?
Technology is key to having a forever transaction with the customer and it will likely require investment. Maybe you can fake it during the testing phases. However, to proceed with a successful offering, you will need to communicate, bill, support, and deliver to your customers in a frequent and flexible manner. You can't scale up with manual processes. You must be equipped to adapt to changes in hours or days, not months or years.
5. Is your culture truly customer-centric?
Every organization claims to be customer centric. But organizational structure often reveals the truth. You can find clues in the leadership background, even in the office decor (What's on the wall? IPO hardware? Old products? Customer photos and letters?). Key company-wide metrics also present a window to underlying strategy. Some organizations rally around quarterly earnings, new customers, and major product releases. Others focus on "member-since" milestones, customer lifetime value, and net promoter scores.
Performing a serious self-assessment takes time effort. But it's worth it. If you can build a successful model that wins your customers' loyalty for the long term and justifies automated recurring payments, you will have a more predictable cash flow, better customer data, and maybe even a higher valuation from investors. Industry leaders like Under Armour, Microsoft, and Netflix have successfully created an ever-expanding customer base of loyal subscribers who keep coming back. Are you ready to do the same?