Is your subscription business due for a service inspection?

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By Morten Suhr Hansen

In these years, there is a huge focus on the innovation of new subscription models. Almost weekly, we see new and exciting subscription concepts go to market – both from start-ups and from established corporations. This is an exciting development!

However, establishing or running a subscription business is not the same as having success as a guarantee. The competition for subscription customers’ favor is getting fierce, as more and more subscriptions come to market. My prediction is that, in the future, we will see that the business focus will shift from how to develop new subscription concepts, to how to run a subscription business most successfully – in other words, from ‘Subscription Innovation’ to ‘Subscription Excellence’.

Most subscription businesses need a service inspection

At Subscrybe, we are often involved with exactly this kind of project, with our customers. Projects, where it’s all about developing and optimizing the existing subscription business across disciplines like sales, onboarding, retention and win-back – and with a focus on the systems and processes, as well as the way that performance is measured.

Desk research

Quite often, these projects start with a complete review of the entire subscription business. We call this a “Business Review”, and here, the business undergoes a thorough inspection, on the basis of which we offer concrete recommendations and optimizations.

So, do we even find anything, when we initiate the inspection? Absolutely, even with the more well-driven subscription businesses. Because exactly like a car needs to be polished and taken care of, the same goes for a business. It is not rare that we can identify optimization areas that improves the performance of the business by 15 to 25 percent.

Typical challenges in subscription businesses

The good question then becomes: Are there any challenges that reoccur across all of the large subscription businesses that we look into? The answer is yes. Because of this, I’ve tried to identify eight of the most common challenges that we meet in large organizations.

1. There is no mapped-out customer journey across the value chain of the subscription, which means that the subscriber isn’t experiencing consistency in the experience that he or she has, during a subscription process.

2. An anchoring of responsibility is missing through the value chain. This means that it is not clear, who in the organization has the responsibility for the customer experience – (for example, who in your organization has the responsibility for the very important ‘onboarding’ of new subscribers?

3. Business units are not measured in relation to the strategy. Perhaps the most important parameter is to secure long retention and a high lifetime value of customers, but the sales department is still measured on the number of new sales and not on the value of these.

4. Vigtige nøgletal som eksempelvis CLV (Customer Lifetime Value), churn og rentabilitet beregnes ikke korrekt. Faktisk oplever vi ofte, at selv store organisationer har svært ved at beregne churn korrekt og konsistent på tværs af kanaler og ofte ikke har styr på den vigtige kundelivstidsværdi.

4. Important key figures like CLV (Customer Lifetime Value), churn and profitability isn’t calculated correctly. Actually, we often experience that even large organizations have a hard time calculating churn correctly and consistently across all channels and very often, have limited control over the Customer Lifetime Value.

5. Old (industry-)standards and processes inhibit development and innovation. Often, the organization is stuck in old processes (and systems) that are difficult to alter and have certain industry methods that both the business and its competitors have a hard time getting rid of.

6. Efforts are unfocused and of low quality. It demands an intense focus to be on your toes all the time and secure ‘high-perfomance’ across all efforts and very often, there is a bigger focus on new projects, as opposed to the boring everyday work that, nonetheless, creates lasting results.

7. The product portfolio and the pricing is not monitored and maintained. The customers and the market are constantly moving, but is the business good enough to do the same? Is the pricing dynamic and exposed to recurring optimization or is it just a part of the yearly budget exercise?

8. Prioritization of efforts, products, and services is missing. Larger organizations often have a wide product portfolio, but how is the sales prioritized between different products and services? Very rarely, there is a conscious prioritization in relation to the value of different offers.

If you are part of a larger subscription organization today, see if you can agree with some of the above-mentioned challenges. There is probably a risk that you know some of them. At the same time, there might be other and more specific challenges hidden in your organization. Challenges that are costly on the bottom line. Perhaps it is time to give your subscription business a service inspection?

When helping our customers with this, we often use the model ‘How to build a subscription business’, where the business and its performance is evaluated on the basis of the seven areas in the model. You can find the model in my newest publication, ‘The Subscription Movement and How to Succeed In It’ that you can find right here.

I figure that a service inspection like that can give you an even more well-oiled subscription machine?