It’s quite a shift.
A growing number of marketers are moving from the single sale model to a recurring revenue model.
Netflix, Apple Music, and Hulu are the best-known subscription marketers.
They’re joined by firms such as Trunk Club, Munch Pak, and Cratejoy in the subscription fray, offering digital and physical products in every conceivable category.
The Metrics Of Subscription Model Marketing
With one critical difference, the subscription model metrics lineup features the usual suspects most digital marketers know…
- Offer Conversion
- Customer Retention By Offer
- Lifetime Customer Value
- Churn Rate
- Annual Recurring Revenue
- Net New Business Revenue
- New Revenue From Current Customers
- Customer Engagement
- Referral Generation From Existing Customers
The critical difference… a greater emphasis on the recurring revenue metrics of retention.
And with this critical difference comes a formidable challenge.
When the revenue model is recast to become more reliant on recurring revenue, retention tactics should be given a front row seat in the organization’s marketing strategy.
The difficulty of retention is easily underestimated.
“It appears that it’s easier to acquire a new customer than it is to retain a customer in subscription models,” says David Bilicic, SVP with Magid, a research-based consultancy.
“One of the subscriber segments we looked at in our research was the ‘guilty follower’ of subscriptions. They have a subscription or multiple subscriptions because they were hoping to save money or liked the convenience of it, but they end up not using it and feel guilty about that.”
Marketing The Subscription Model To Address Customer Expectations
As the model shifts to a greater dependence on recurring revenue, so does the mechanism of managing customer expectations.
Ramanath Subramanyam, associate professor at the University of Illinois Gies College of Business, says these expectations are set before a prospect becomes a member or subscriber.
“We know that consumers who consider subscription models will stay away from long term commitments before fully experiencing the periodic service.,” says Subramanyam.
“It is only going to work if there are monthly or similar commitments with no penalty for cancellation.
“Firms need to think of not just finding new ways to entice subscribers. They also need to figure out continual improvements to products, pricing strategy, usage tracking, and A/B testing different offerings in different markets or consumer groups to figure out what is sustainable.”
The Subscription Model Gains Steam In B2B Marketing
“Several of our B2B clients are moving to a subscription-based model,” says John Mannion, Doremus EVP and director of client relationships.
“It’s a much lower bar to acquire a customer and a much lower spike in deal wins but they get to accrue the revenue over a longer time. The big difference is B2B marketers need to keep nurturing that customer over a consistent period rather than waiting for a multi-year renewal cycle to come around again.”
Tackling The Challenge Of Keeping The Customer
The customer’s concept of value requires constant nourishment. Marketers who grasp this and address it can stanch churn and give recurring revenue growth a fighting chance.
What brought the customer in the door is rarely enough to keep them.
“The novelty of subscriptions wears off,” says Bilicic.
“It becomes a challenge to consistently offer a curated set of offerings that drive interest and value, and ultimately customer retention.”
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