Review: ‘Subscribed’ Offers a Playbook for Subscription-Based Companies

Businesses are working hard to move their customers to subscription-based models, with real results. McKinsey has estimated that subscription-based e-commerce, for instance, has enjoyed 100 percent growth in each of the past five years.

The shift has even lead some to suggest the “death” of one-off product sales — at least in areas like software. Certainly, the growth in subscriptions and membership-based services has had broad implications for marketing – and specifically, local and SMB Tech Marketing. The shift to subscriptions also incorporates many of the progressive trends and movements in SMB Tech Marketing (i.e. Cloud Based Services, membership and loyalty programs, On Demand, The Sharing Economy, Freemiums, Agile Development, etc).

Subscription models are now a big factor for Netflix, Amazon Prime, Apple iPhone upgrade programs, razors, cosmetics, food, clothes and airline clubs. Health services and car/bike/scooter-sharing services loom large for the future.

Local and SMB economies – with their deep roots in newspaper subscriptions– have caught on, too. Personally, I’ve had subscriptions to bi-weekly CSA boxes (community supported agriculture), garage-door maintenance programs, and landscape services. That means I spend more on them; over consume them; and never quit. In return, I almost never get left hanging, and often get better service. I’m not alone. Fifteen percent of online shoppers added one or more subscriptions last year, again per McKinsey.

With the shift to subscriptions, businesses “are not pricing an object, they are pricing an outcome,” notes Zuora subscription platform executive Tien Tzuo in his new playbook, “Subscribed: Why the Subscription Model Will Be Your Company’s Future – and What to Do About It.” “The winners will be the services that don’t just manage routes, but solves for A to B,” he says.

Subscription culture also means “a shift to a customer-centric organizational mindset.” While technologists and marketers will always remain deeply involved, finance departments increasingly sit at the head of the table.

“Today, finance teams are experimenting with a whole new rulebook and set of metrics,” notes Tzuo. Today, the CFO – even more than the CMO — increasingly define “the operating metrics that are distributed through entire organizations, such as pricing, packaging and analytics.”

Ultimately, Tzuo says the new subscription culture is all about adding value and boosting Annual Recurring Revenue (ARR). “Subscription cultures are about making sure your customer continues to success with your service over time, and translating that ongoing value into revenue.”