To make the successful transition from perpetually licensed products to subscription services requires companies to adopt a subscription mindset.
The Subscription Mindset
The subscription mindset is a unique perspective on the measures of business success and the foundations of the company – customer relationship. Many of the tenets of the subscription mindset are not new to technology vendors, but the methods by which resources are allocated and performance are measured must change. The principles of the subscription mindset include:
- Customer retention is everything!
- Full revenue potential is dependent upon the longevity of the relationship (Life Time Value).
- Services emphasize Customer Success to drive use and adoption of products.
- The role of Support shifts from issues resolution to adoption and engagement.
- The measures of Service success are based on retention and expansion of recurring revenue.
Unlike perpetually licensed products revenue from subscription is earned over the term of the customer relationship. No longer does the technology seller enjoy the benefits of an upfront payment for a product. Revenue flows if subscriptions fees are collected. A subscription relationship must be retained to maximize revenue potential. The opportunity for subscription-based relationship is not solely from the fees earned from the relationship but the potential to create new growth opportunities.
The mechanisms to sustain and grow relationships come in the form of programs designed to help customers adopt and successfully apply the products they use. Post sales or subscription services must assume the responsibility for more than installation and issues resolution. Services are now responsible for the ongoing customer success.
Subscription Success = Mindset + Metrics + Programs
The subscription mindset requires that companies embrace a new perspective on customer relationships as well as new measures of success and programs to help customers adopt and succeed with products.
Subscription Mindset – A Catalyst for Transformation
To be successful with subscription licensing programs you must adopt a subscription mindset. The subscription mindset is a framework that will guide companies to new perspectives on the value of sustaining customer relationships; suggest changes to organizational structures to meet post-engagement customer needs; introduce new methods for measuring business success; and influence the design of new post-sales service programs. For more information see the featured report below.