ENHANCING & REFINING AN EXISTING SUBSCRIPTION BUSINESS MODEL

To enhance a subscription model is to make it run more efficiently which can yield big increases in revenues, reductions in cost and opportunities to save time throughout. In all of our years of working with many subscription-based companies we've never encountered a perfectly optimized model. Every model can be improved. Often it's a matter of objectively documenting the existing model, evaluating it end-to-end and identifying the unoptimized pieces that waste money or time or act as a removable obstacle to greater revenues.

Most companies don't have their subscription model documented. It should be written down in a sufficiently detailed way that those with reasonable brains about such matters could understand the model at a glance. If you were privy to G.E. aircraft engine manufacturing there would be complete documentation on exactly how those much-more-complex engines are constructed. If you pay close attention at a fast food restaurant like McDonalds, you'll probably spy a step-by-step flow of how to assemble every meal they serve. Documenting processes in detail is an exercise that helps a company recognize problems or opportunities in their flow.

We've been involved in many such efforts where applying a time table to a process would reveal mysterious gaps of time that seemed to interrupt an otherwise efficient flow. When we dug in to learn more about those gaps we discovered that they represented bottleneck delays often because someone couldn't delegate some task to others. The whole team's work would have to lock up at several points during a process awaiting the input or actions of a single individual. When a subscription model is documented such holes can be objectively recognized and quantified in terms of how they may adversely affect sales or costs. Then recommendations can be made to fill those holes with better options. Efficiency gains are often revenue gains… forever.

Subscription models have a multitude of variables to review: everything from product development to renewal programs, acquisition marketing, cross-selling & upsell efforts and so on. How exactly is your model faring in various ways vs. competitors or industry norms? Internally, you may believe that everything you do is smarter and better than your competitors. But if competitors exist they must be doing something better than you. What is that exactly? We can help you find out so you can consider adapting your model to incorporate the "best of" advantages they have over your business. That's one great way to take share from them.

Key Questions Every Subscription or Membership Company Should Know

Are you acquiring new customers in an efficient way? Is cost-of-acquisition trending in the right direction? Are you utilizing best practices in all matters related to attracting and converting new subscribers? We can objectively evaluate what you are doing against established norms and answer these kinds of questions. Where your model is weak we'll provide specific, actionable recommendations on how to improve it.

Is your upsell model performing well? Is there anything that can be improved there? If you have an upsell model you know that those subsequent sales are typically the most lucrative you can get so even a modest enhancement to how you drive additional selling opportunities can make a major difference in profitability. We've worked with clients who were fixated on only certain ways of running their upselling campaigns ignoring a number of other variables that were commonly employed within their industry. They couldn't accept the observation alone so we worked up a way to objectively test the proposed changes so they could let the numbers drive their decisions. As is often the case when there is an industry current (a common practice across many established competitors) against which a company believes fighting the current is THE way to go, an objective test can reveal that going with the flow is actually a better way. Especially in upselling campaigns, even modest model evolution can yield enormous results.

Are you retaining as many customers as you believe you should? How is your retention metrics vs. industry norms? Any room for improvement? All subscription companies know it is much cheaper to keep a subscriber than it is to replace them. But many companies put too little effort into this part of their model. They're often so fixated on acquisition of new subscribers they simply accept bigger holes in their leaky bucket. Some of these holes can be closed with simple adjustments to this part of their model.

Example: Improving Subscription Model Retention With Our Expert Consultants

Let's explore a tangible example about retention to help illustrate how BI can help a company with this kind of project. We worked with a company that had some retention issues. We recommended a focused survey for cancels & expireds (those who canceled and those who let their subscription lapse) to help quantify exactly why subscribers were slipping away. We have deep experience helping companies get closer to their customers and offered to develop this survey for them. Instead, they chose to develop it themselves.

Not long thereafter, they told us they intended to substantially cut their prices. Why? Their survey showed that just about all cancels were price-driven. We know that price is always a consideration in why subscribers quit but we were suspicious about it being such a dominant driver of cancellations. We asked to see the survey.

The survey reflected inexperience in how it was put together and it looked like it was (too) quickly developed vs. being well thought out. Still, it was not terribly constructed though we continued to hold suspicions about the results. So, we went to the front-line employees (sales & service people) who interact with subscribers every day. They were charged with actually executing the survey when cancels were made via phone. We told them that the company was thinking about cutting prices in a big way because the survey implied that price was a dominant driver of cancellations. The front line people immediately scoffed.

"3 things about the survey," said one of them, "one, they didn't make us aware of the importance of gathering this information, so I'm not sure our team was very careful about seeking out the reasons. Two, most of the reasons people give us for cancels were not included in the list of options they came up with. And three, when they set the survey up in our system they made price the default option." He continued, "If we were not given a reason for the cancellation or if the cancel was manually driven by email, web request or other, price was the default reason entered."

Instead of cutting prices based on a very flawed approach to this project they allowed us to help them do it right on a second try. This time, we did things the company did not do. For example, we:

• involved the front line staff to help us list EVERY reason why customers canceled their subscription. The resulting list was longer than the first one.
• included an "other" reason just in case even the front lines missed something important.
• motivated the company to clearly and regularly communicate the importance of gathering the correct information to the team.
• motivated the team to contact cancels that came in via email and web forms to try to gather their reasons as well (not just those that canceled by phone).
• set up "unknown" as the default reason in their system
• kept in touch with the team managers reminding them of the importance of gathering good information.

As a result, while price was still one reason why subscribers canceled it was no longer the dominant reason. This resulted in 2 key outcomes:

1. The company did not cut it's (revenue) throat with a needless price decrease, and,
2. A number of other reasons that rose to the top identified several resolvable issues within the company's control. This gave focal points to enhance this part of their model.

End result: several holes in the subscriber bucket were closed or constrained facilitating an improvement in retention rates. This yielded greater, highly-profitable renewal revenues which, tabulated over time, added a hefty amount of profit on the bottom line… profit that would have otherwise been sacrificed.

Enjoy the Many Benefits of a BI Engagement

BI experience with this kind of work helped us detect a probable flaw in the in-house effort as soon as we heard the result. We knew to dig in deeper to either verify their conclusion or identify the error. The steps to take were well proven from past scenarios; for example, we knew going to the front lines might paint a different picture. Our company outsider status probably contributed to those sales & service people feeling a bit more relaxed about offering their input (we also learned how much they appreciated being asked, something the company failed to do in the first round). The remedy was also a "been there, done that" tactic- a smarter way to execute this kind of intelligence-gathering process.

Had the company gone with it's initial conclusion, margins would have been hit hard for an invalid reason. Revenues would have suffered over the long term. Because the actual reasons driving most of the cancellations were NOT price related, we doubt that the big hit in revenue-per-subscriber would have made much of a difference in their retention metrics. Instead, we suspect cancels might have stayed around the same level or quickly returned to the same level once the initial price cut effect wore off.

Hiring BI to help you enhance or refine your subscription model is engaging long-term experience to objectively evaluate and recommend ways to grow your revenues, reduce your costs and increase efficiency. We are not biased per company "we've always done it that way" traditions nor afraid to point out delegation bottlenecks and other controllable (thus fixable) issues. Our outsider status is a big benefit as is our objectivity to see your company with great clarity. We've never encountered a subscription model that was perfectly optimized in every way. Try us and we'll find some lucrative opportunities to enhance your own model.

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