Subscription services are no longer solely the purview of consumers. Trends in office space, finance, technology, sustainability and more are all pushing consumption-based services deeper into the B2B landscape. In fact, Stanford Business went so far as to predict that all business, B2C and B2B, will become subscription businesses in the future.
According to research from Zuora, the subscription economy has grown more than 300 percent in the past seven years and shows no signs of slowing. The promise of simplified IT, optimized resources, mitigated risk
But, while the move to subscription-based models might be inevitable, it’s not a straight or simple path. Here are three tips to get it right.
Understand that customers are focused on outcomes
B2B customers aren’t streaming movies, ordering vitamins or even signing up for monthly STEM games for kids. Instead, they want to invest in driving business outcomes—from building a stronger customer focus to optimizing for efficiency and driving revenue.
As an example, a consulting firm was losing proposals due to long discovery time. Working with SaaS startup 9lenses, they used the cloud assessment platform to reduce the time needed to learn the client’s business from eight to three weeks. As a result, the firm was able to be more profitable, doing more work with fewer resources and raising its margins by 10 percent. Another example is CompStak, a crowdsourced commercial real estate data platform that gathers and quality checks real estate information so agents can focus on meaningful networking, accurate analyses, and closing business.
Recognize analytics are the golden goose
The brass ring of the as-a-service model is data. Collecting customer information and distilling insights enables businesses to add tangible value and, as a result, become incredibly sticky. Case in point:
Kareo, a cloud-based medical technology platform, utilized Gong’s sales conversation intelligence platform to increase close rates by 30 percent, accelerate onboarding time by 20 percent and cut the sales cycle in half.
Usage data also feeds the R&D process; services transform information that used to come from customer surveys and focus groups into a steady, real-time data stream on how, when and why customers use your product. HP’s Device-as-a-Service (DaaS) does just that. It helps customers get a live look at how their devices are functioning, and even more importantly, actually use data, not just collect it. For example, HP’s TechPulse applies analytics and machine learning along with contextualized data to help users put action behind their insights and cut down on spending and resources.
Analytics can even help companies create new markets. Take the Nest Learning Thermostat for example. It’s a B2C product that uses sensors to program itself based on an individual’s daily activities. And Nest used its thermostat data to set up a subscription service for utility companies, who pay for energy management insights and services.
Plan for organizational and financial implications
The people, processes, technology, security and systems required to deliver a subscription are very different than those required in simply fulfilling an order. No longer is a sale a one-time “won and done” deal. As-a-service sales generally take place in the C-suite, so moving to a subscription model demands customer relationship managers who can facilitate higher-level conversations and engagement across business groups.
These models also demand a different financial structure, moving from CapEx to OpEx. This means that companies who are pursuing a shift to a services model need to be willing to absorb a short-term revenue hit against a future investment. Cisco transformed from hardware to a subscription software-licensing model, necessitating a significant engineering effort and a new business unit as well as a sales and marketing makeover. While the company saw revenues through the software business earlier than expected, it also saw a drop in overall revenues as the company went through the transition. Adobe also successfully did it with the launch of the Creative Cloud monthly subscription, adding a substantial bulk of net-new subscribers along the way.
All the benefits of subscription services that we have come to crave as consumers are appealing to businesses, too. Companies who are ready to make the move to the as-a-service model certainly have challenges ahead—but the rewards are well worth it.
