Right now, subscriptions are everywhere. Every industry is experimenting with subscription. Some are working. Some are not.
The best subscription companies seem to be disruption proof. Subscribers have made their products and services habits, and aren’t looking for alternatives. Churn is low, and NPS is high.
If you want that kind of ongoing, trusted relationship with subscribers, you need a special kind of organization.
Culture is probably the hardest and most underestimated challenge of thriving in the Membership Economy. To succeed, you’ll need a clear vision as well as support and a steady drum beat from leadership.
Success really comes down to one simple (but not easy) thing.
A Membership Mindset.
To win in this new Membership Economy, you have to have a membership mindset. If your team doesn’t understand what makes a subscription model work, you’re going to continue to struggle. And if you DO have the right culture, frankly, even without subscription, you’re likely to enjoy trusted relationships with your customers that expand over time.
Subscription is a pricing decision, but membership is about a mindset. The right team, culture and metrics are critical. These are the hardest and most underestimated challenges of thriving in the Membership Economy. It’s the most powerful lever you have.
At the heart of every successful company in the Membership Economy is a forever transaction.
The Forever Transaction is that moment when your customer takes off their consumer hat, dons a member hat and stops looking for alternatives. They are going to trust you and keep paying for you.
The reason that your customer is willing to do that is because they trust that you will continue solving their problem or helping them to achieve their goal for as long as they continue paying.
There is an expectation of a long term relationship on both sides.
We’re talking about a different kind of relationship. In episodic transactions, there is limited expectation of any kind of relationship beyond the purchase. Let’s say I’m having a midlife crisis and want to feel young. I have a goal of driving fast and looking youthful. These are ongoing goals, not one-time goals. So I buy a Lamborghini.
Now, if I roll the Lamborghini off the showroom floor and drive it home in first gear, and I am frustrated because the car doesn’t go fast…that’s my problem, not the dealership’s. They have all my money already.
But if I’m subscribing to the same car, suddenly, there’s an obligation on the dealer’s side to make sure I’m getting the value I paid for, and achieving my ultimate goal of driving fast and feeling youthful.
They need to make sure, first of all, that I know how to drive it, to get the full enjoyment.
Not only that, but they need to continue to evolve the subscription to make sure that it delivers on enabling me to drive fast and feel youthful. That might include periodic maintenance, maybe even installing improved parts or replacing out the whole car. They might even go a step further, and recognize that there are other ways to help me feel more youthful, that don’t have anything to do with the car, like offering me a facial when I bring the car in.
The forever promise is not about the product. It’s about the customer. It’s different from a brand promise. A brand promise is what anyone can expect from the company. The forever promise is what the customer wants on an ongoing basis.
It’s what your customer wishes you’d promise them, beyond just the specific features and benefits you have today, to continue to help them achieve their goals and solve their problems.
CUSTOMER vs PRODUCT CENTRICITY
Your product is just a small piece of the customer journey. It’s important to know where your offering fits in, as well as what else is helping them on that journey besides your product.
A lot has been written about the subscription journey. But most organizations are focusing on the wrong things. It should be about more than the customer’s journey with your product. Don’t limit your understanding of your best member to product usage data that you are able collect.
Take a step back. You want to start by understanding the journey they’re on that brought them to you in the first place—the goals they’re trying to achieve.
- If you’re a bank—the goal is to live the life they want, to be independent of their parents or employers, or to be able to provide for their families. It’s not about I want to have an low friction way to service my loan.
- If you’re a car wash, it’s about having the car be clean. I spoke at the International Car Wash Association a few years ago and was surprised by how much they focused on the car wash experience itself, rather than the bigger goal. I don’t care if the carwash takes 10 minutes or 9 minutes. I’d rather not go to the carwash at all, if there were a away I could still make my car be clean.
- If you’re a clothing store, it’s not about shopping. I hate shopping. I’d rather just have “the right clothes for the right occasions in my closet” with no friction.
Start with the goal. How can you make it easier for someone to always have a clean car? Or to always look good, or to be financially secure? Your user data is not going to answer that question. The only thing that will is understanding the customer’s own goals.
Is your company customer centric? If not, you have a big problem. Now, most companies say they are customer-centric, but that’s because you don’t give them another option. When I walk into a company, or spend a few minutes talking with someone who works there, I can usually tell right away if the organization is product centric or customer centric. Product centric companies focus everything around the people who design and build—the engineers, the journalists, the doctors—and tend to launch new headline benefits with a lot of fanfare. Customer centric organizations are structured around the customer journey, and continually and quietly improve the product offering (not just the “product” but all the services that go into the full solution).
The important thing here is that if you’re focused on products more than customers, it’s going to be easier for someone to attract away that customer’s attention. If you focus on the customers, you will be more likely to understand when their loyalty is waning and why they are less engaged, so you can fix it. If you’re tracking the reasons for cancellations and shoring those up, the likelihood of keeping the customer you attracted is just going to be much better.
HANDLING EMPLOYEE PUSHBACK
When you begin talking about these kinds of changes with your colleagues, it’s important to understand how they might react. Before you dive in to start changing your metrics, business processes, research, org structure, take a minute, and just as you considered what was driving your customers, let’s take a look at your employees. Sometimes the strategy is the easy part, compared to the culture part of bringing the rest of the organization along.
So check in with your teammates and the people above and below you—both for understanding and for support. Keep in mind that their reactions may be beneath the surface.
The truth is, if your colleagues push back, and tell you why they are concerned—that’s great. Congratulations, you have an open culture. More often, and more worrisome, people nod along, but inside, they just aren’t that supportive.
I’ve seen 3 big “under the current” challenges that prevent organizations from transforming to a membership mindset.
- The first challenge is probably the easiest. They truly don’t understand why things are changing. I remember talking to an editor at a major news organization who told me, “I just let the commercial side do whatever their “flavor of the month” strategy is, but nothing really changes, so I mostly ignore it. Right now, they’re all talking about “reader revenue” but it doesn’t really affect me. I just keep my head down.”
- The second challenge I often see is with employees who have been around awhile. They see the risk in moving from short term revenue goals to a longer term mindset. They worry whether change will cannibalize their business. They fear their best people will leave – product people, sales people, and other key employees. And they fear failure, saying “this is risky. If we can’t make the leap, build the recurring revenue—we fail. And we’re moving too fast.” Often the person with this point of view is very senior—the CFO or the CEO. I was in one meeting where we were working on a subscription model in a Fortune 50 company and the last thing the GM of the biggest division said before leaving the working team was, “Don’t destroy our $25B revenue for a little bit of subscription please.” This is why, if you are striving to change to a membership mindset, it’s so important to paint the picture of the future that reflects the risk, and the revenue dips and the challenges optimizing technology that are bound to happen. Painting a picture that’s too rosy won’t work—better to share that list of worries, so that your colleagues can relax, knowing their concerns are already on the list.
- The third challenge is when the individual is worried about their own future in the organization. Maybe the company priorities don’t match their skills, or will result in that person losing budget or status within the organization. This challenge is the hardest in many cases, because as you change your strategy, you might need different people. And if you think of your staff as a family and not as a team, it might be uncomfortable to have a frank conversation about changing needs. I had one client, with very lean staffing, refuse to let their “head of faxing” go even though they desperately needed the head count to hire an email marketing person. Part of the reluctance was because he was “part of the family,” and part of it was that he was pushing back so hard and making a (ridiculous) case for the importance of having a strong faxing team.
You can mitigate these three challenges by educating your team on the reason you’re moving to a membership mindset, and why it’s about more than subscription pricing; by helping them understand the journey you’re going on; and by being candid about the skills and mindset you’ll need from your team.
BUILDING YOUR CULTURE (It’s as easy as 1, 2, 3)
Now that you’ve touched base with your team and have identified a general understanding and willingness to build the kind of organization that prioritizes that forever transaction, it will be as easy as 1, 2, 3 to build that organization out.
- Focus your team on your forever promise. What is that ongoing commitment you have, to help your customers solve an ongoing problem or achieve an ongoing goal that will justify subscription pricing?
- Make sure everyone in the organization has the tools they need to support this forever promise, that they’re being rewarded for the right behaviors and that the organization is tracking the right goals.
- And finally, it’s all about the long game. Focus on your short term product releases or quarterly earnings at your peril. The right place to focus is on Lifetime Customer Value, and making sure that the whole model works in an integrated, seamless way. It can be tempting to focus too much on today’s members, using your microscope instead of your telescope, or on attracting tomorrow’s members without engaging them once they join. You need to find your balance, and continue to iterate to stay balanced.
ONE THING TO REMEMBER
If there’s one thing I want to leave you with, it’s this. Remember, subscriptions are a pricing tactic, not a strategy. This is where the problems begin for many organizations. The secret to building a disruption-proof, forever transaction is to love your members, and their mission more than your own processes and products. If you use your members’ ongoing goals as your organization’s north star, you’ll be well on your way!