We know that fostering and retaining relationships with your customers is the most important thing for business growth—which is why businesses need to be on the lookout for new consumer trends. One major shift in the way people shop and receive goods, especially true with the millennial generation, is subscriptions. Millennials are moving away from traditional consumption habits and getting on board with automated, renewal-based purchasing. Businesses will do well to consider how they can deliver their products and services with a subscription model.
Subscription-service models provide a constant connection with customers that are invaluable, but can also put your business at risk with uncontrolled customer churn rates. It’s important that you understand that even small optimizations will increase customer retention, keeping churn rates low and returning customers high. Your business will need to have a specific set of subscription management tools and billing models to effectively keep customers.
Understanding how your service or product will best translate into a subscription revenue model is the first step in making that crucial transition. Data shows where millennials go, the rest of the consumer market is likely to follow. Smart merchants expect to see subscriptions and other forms of automated purchases overtake single purchases. The market leaders at the innovative frontline are paying attention to subscription commerce right now—and learning how to turn this business model into a compelling competitive advantage. Understanding the psychology and motivations of this trend will help to create a seamless transition.
Use your subscription strategy to transform your business:
- Go beyond payments—develop a relationship strategy: Organizations need to reinvent what it means to sell, making a shift from monetizing products themselves to monetizing relationships and experiences. If you are not monetizing the experience for every customer you gain, there is no doubt you are losing money.
- Consider how your product can support a service or become a service: Adaptability is crucial as subscriptions tear down the walls between products and services. Innovative companies are creating subscription-based, experience-driven service models for everything from televisions to razor blades. Instead of offering product software as a one-time purchase—consider selling as a service with monthly or annual fees.
- Make subscriptions easy—not complicated: To be successful, subscriptions needs to offer ongoing value to the end user that is pleasant and consistent. For example: offer access to your technology or information. Additionally, access to the product or service needs to be seamless, with simplicity in purchasing and delivery.
- Get your infrastructure ready to endure recurring transactions: Recurring transactions are going to dominate the marketplace in the subscriptions economy. The implications of making the switch from one-time payments to recurring billing cycles is not to be underestimated. New technology, business processes and revenue management practices are needed to support such a shift.
From one-time shopping trips to recurring revenue models, the way we live and consume is changing, and at an incredible pace. In this market renaissance atmosphere, mid-market companies have the opportunity to reinvent their existing offerings into products and services. Right now is the perfect time for reshaping your business so that it delivers meaningful experiences and value-added services that lock in loyalty for years to come.
In the next installment of our 3-part series about mid-market strategies, we will discuss how you can take your business global.
Download our MyCommerce Mid-Market Strategies for Growth Guide to learn more about our extensive resources and tailoring the right solutions to propel your business to the next level.