Did you know that the largest evacuation effort of British citizens since Dunkirk happened just over a year ago?
Over 150,000 British citizens were left stranded abroad after Thomas Cook Group, one of the world’s oldest travel agencies, went into liquidation on September 23, 2019. Over 21,000 people lost their jobs overnight, and the UK’s Civil Aviation Authority had to fly back tens of thousands of disgruntled British tourists via chartered flights cobbled together from over 60 different airlines. It even had a code name: Operation Matterhorn.
Thomas Cook had been in operation since 1841, when its founder started arranging single-day rail excursions for temperance supporters in rural England. It eventually became a national institution, arranging holidays for millions of middle-class Britons over the decades. Recently the company had tried to diversify into online booking and airlines, but it was too little, too late. People just weren’t using travel agents anymore. A 178-year-old company vanished overnight. As it turns out, the travel industry had plenty of systemic problems even before COVID arrived.
If there’s any industry that could use a little more predictable recurring revenue in its business model, it’s travel. And that’s not just because of the current crisis. This has always been a transactional, unit-based industry: hotel nights, restaurant reservations, flights, cruises, etc. Historically, operators have run on discrete booking sales, and agencies have run on commissions. Startups like Expedia, Travelocity and Orbitz (not to mention Airbnb) have swiped billions of dollars worth of margins from this model. The traditional travel industry had been struggling for quite some time. Then came COVID.
Given this context, it’s no wonder that brand names like InterContinental Hotels Group, Marriott and Accor have all launched or are considering monthly subscription plans. Subscription models have the potential to completely transform an industry that has historically been based on boom-or-bust cycles of bookings and commissions. The current crisis has given the industry time to reorient itself towards new sources of recurring revenue that are both sustainable and predictable.
So what will the travel industry look like next year after it (hopefully) emerges from its year-long hibernation? Based on what I’ve been reading lately, here are a few new trends I think we’re going to see:
Subscriptions Come to Air Travel
We all know the airlines have been struggling for years. They run an incredibly capital-intensive business, and the advent of low-cost carriers has pitched them into a brutal pricing war. Lots of times they don’t know if a flight is going to be profitable until the passenger door slams shut. Airlines are in desperate need of some predictability and stability in their revenue models. Long-time Zuora customer Surf Air has been a pioneer in this space since 2013 — they offer access to a set number of routes in California and Texas starting at $199 a month. The company recently secured $200 million in new funding and plans to go public soon. Expect to see similar offers from the major airlines next year.
The New Business Travel
Millions of people have shifted to remote work on a permanent basis. Many of them are moving to more affordable places to live. Companies will be shrinking their office footprints. There’s going to be a new need for on-location meetups on a recurring basis. United Airlines recently cut a deal with Peerspace, a meeting space aggregator, to offer end-to-end business trips on a subscription basis called Team Together. Companies sign up for a monthly package, and they take care of all the details: flights, lodging, private workspaces, and social events.
Airbnb-ification & Netflix-ification of Hotels
This has been going on for some time, but I bet we’re going to see more hybrid hospitality subscription models that combine the independence and individuality of private residences with the amenities and services of hotels: keyless check-in, 24 hour concierge, business centers, etc. Two boutique hotel groups, Selina and citizenM, have recently launched subscription plans, including corporate packages that bundle overnight stays and meeting spaces. More and more of us are going to be living in secondary work/home spaces for set periods of time throughout the year. Timeshare models have been around a long time, but legacy players like Marriott Vacations, Wyndham Destinations and Hilton Vacation Club may need to re-orient and rebrand in order to capitalize on this new market demand.
The Destination Club Model Moves Downstream
What if you were a hotel that had all your booking revenue lined up a year ahead of time? What kind of planning resources and new ideas would that open up? That’s essentially what a destination club has. Here Inspirato is another pioneer. Their tag line is “Subscribe to safe, luxury vacation rentals.” Members subscribe for access to a set number of stays at high-end homes around the world. They’ve suffered hardly any attrition during COVID, and reported a renewal rate of 97% in June. Expect to see this model spread to all sorts of non-luxury groups.
The Rise of Experiential Travel
This is another trend that I think we’re going to see dramatically accelerate next year. In much the same way younger people are forgoing ownership in favor of access these days, they’re looking for compelling travel experiences that don’t involve lying on a beach chair. And many of these experiences are just a car ride away. As Ruzwana Bashir, CEO of experiences platform Peek.com told me: “We went from $1 billion in bookings in January to net zero in April when COVID hit the USA. But people still wanted safe ways to get out of the house, so they explored their own backyards. It led to a record-breaking summer for us, with a surge in bookings for activities like renting a boat, taking your kids apple-picking, or being more active with paddleboarding or horse back riding. The majority of activities happened 50-150 miles from consumers’ homes. We think this will hold true next year as people will continue to take advantage of close to home experiences and daycations. We predict families will do these local trips more frequently, rather than saving up for a big, two-week family vacation abroad.”
To wrap up, I think we’re eventually going to see the travel industry’s reliance on individual bookings, commissions and fee charges collapse under its own weight. It’s the depressing result of a product mindset that prioritizes add-ons and revenue extraction, and devalues travelers. We don’t want to see another Cook travel debacle. Fortunately, the experience of travel planning is rapidly evolving from a sequence of painful transactions into a smart, intuitive service that solves for getting from point A to point B with zero fuss and zero logistics. (CLEAR’s new mobile app, for example, tells you exactly when to leave for the airport based on traffic data, secure screening, and terminal walking times. In short, subscription models enable experiences, which is what travel is all about.) I can’t wait to see more of the world next year.
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About five years ago I bumped into Greg Hywood at the airport. Greg was then the CEO of Fairfax Media (which is now called Nine Entertainment), one of the biggest media companies in Australia: newspapers, magazines, radio stations, websites, streaming services, etc. Greg was coming off a transformational year: newspaper ad rates were dropping, paywalls were going up, digital subscriptions and streaming were just starting to take off.
When we got to talking about “what’s next for Fairfax” now that they were well down the path of their digital journey, he told me something that I’ll never forget. He said: “I need to reorganize the company. Right now I’ve got all of these properties, each with their own sales and distribution arms, and there’s a lot of redundancy, and we’re often working at cross-purposes. I need to re-organize and rethink my entire business in terms of just two things: products and customer segments.”
I was reminded of that conversation this week when Disney announced a strategic reorganization of its media and entertainment businesses. According to the Financial Times:
“Disney said it would separate content production from distribution, with an eye towards making television shows and movies to feed into its streaming services.”
In the old model, all the various product groups at Disney were also responsible for their own distribution. Those two functions were joined at the hip across all their business units: the movie studio made and distributed movies, the streaming service made and distributed shows, etc.
But now, Disney is creating a single distribution arm, to be led by Kareem Daniel, that will decide where to put these shows and movies, “with the primary focus being [Disney’s] streaming services.”
In other words, they’re consolidating everything into two buckets: products and customer segments. Kareem Daniel’s new job is to obsess about Disney customers and where they like to hang out: social media, streaming services, theme parks, movie theaters (one day they’ll be back!), wherever.
“Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it,” Disney CEO Bob Chapek said in a statement announcing the reorganization.
“Our creative teams will concentrate on what they do best—making world-class, franchise-based content—while our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms.”
Lots of people are saying that this is a response to COVID. Lots of people are saying it’s a response to Netflix. Others call it a general streamlining of operations. I’m sure some of those factors are at play, but I think the broader story is that the media industry is evolving.
Media companies are realizing that channels (games, movies, shows, etc.) are really just a matter of format. They shouldn’t be organized and incentivized to compete with one another. You need to put your customer squarely in the center of your organization by surrounding her with great media experiences, in whatever channel she chooses.
That’s the only way to establish a viable direct-to-consumer relationship. Here’s what Bob Iger said several years before Disney+ launched:
“It’s one thing to be as fortunate as we are to have Disney, ABC, ESPN, Pixar, Marvel, ‘Star Wars’, and Lucasfilm. But in today’s world, it’s almost not enough to have all that stuff unless you have access to your consumer who, because of technology, is providing you with incredible data to provide the consumer with a more customized and personalized experience that can be monetized better.”
Disney is trying to set up the same kind of direct relationship that you might have with Apple, or Amazon or Google. Not by throwing a bunch of disparate products into the market, but by creating a single unified media experience.
And the first step in establishing that kind of relationship is to eliminate siloed business units, each with their own content and distribution arms, each with their own incentives and priorities.
Remember, it’s called “Direct To Consumer” for a reason — that relationship can’t be scattered across a bunch of product fiefdoms that are fighting and not sharing information. Instead, focus on making a great product, and then delivering that product to your customer through whatever channels make sense.
Let’s say you have a family whose kids are obsessed with Marvel movies, but they still have a soft spot for Pixar. Maybe they thought the last Star Wars movie was kind of underwhelming, but now they’re all in on Baby Yoda. Maybe they can’t wait to go visit Disneyland once things get back to normal. Shouldn’t Disney know all that stuff, so they can curate content and offers that make sense for your family?
There’s a lesson here for all media companies: stop setting up your business units to fight one another. Have one team that is exclusively dedicated to making a great product. Have another team that is exclusively dedicated to figuring out who your customers are. Use both teams to surround your customers with great experiences.
Instead of you coming to Disney, Disney is now coming to you.
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Zuora’s newest board member Sarah Bond leads Microsoft’s Gaming Ecosystem organization, an integrated engineering and business unit. Her team’s mission is to empower game creators to conceive, build, launch, and manage games – using any and all of Microsoft’s software and services from Xbox to Azure. Over the past few years Sarah supported Global Gaming Partnerships, building Xbox Game Pass – Microsoft’s video game membership service – to a position of strength. Prior to Microsoft Sarah held a variety of senior roles at T-Mobile, where she was a member of the team that led that company’s turnaround. Sarah started her career at McKinsey & Company. She holds a BA in Economics from Yale University and an MBA from Harvard Business School.
Hi, Sarah. Toughest question first: What’s your favorite video game? Also, what’s a current game that you find particularly interesting?
Well, the first game I ever played was King’s Quest II. It’s a special game for me because I used to play it all the time with my father. But probably my all-time favorite game was GoldenEye on the N64. It was the perfect game to play in college with friends on a Friday. In terms of newer games, I’m a little biased because we own it, but Minecraft is pretty amazing. It’s a 10-year-old franchise that’s bigger than ever. It’s accessible to people of all ages and backgrounds, and it gets reinvented every day.
You mentioned in a recent presentation that there are currently well over two billion people playing video games, and you expect that number to increase to over four billion by 2030, which would be just under half of the entire global population. The industry has long since left Hollywood and the music industry in the dust in terms of total revenue (roughly $150 billion versus $42 billion for the global box office and $20 billion for the music industry). What explains this phenomenon?
I think the main concept to understand is that gaming is fundamentally a community activity now. People are constantly chatting with each other, even when they’re playing single-player games like Red Dead Redemption. Multiplayer games have essentially become places for people to hang out in: you have a persona, you have currency, there’s a culture, you do things together. Gaming is the only media form where you can share an achievement with someone, independent of location, language, race, or physical ability. Just since March, for example, we’ve seen a 70% growth in Xbox Game Pass members adding online friends on Xbox Live.
Xbox Game Pass, that’s Microsoft’s monthly gaming subscription service, which you currently help manage. It launched just over three years ago, and now has over 10 million subscribers from 41 countries. The service was around six months old when you joined the company. Given your subscription background from T-Mobile, what was that like?
Subscriptions were still a very new concept for Xbox. At the time, the company’s DNA was still very transaction-oriented: stand-alone title sales, as well as in-app purchases. The team launched the initial Game Pass catalog with the goal of adding more games regularly and improving the offering for members. They brought me on board because they were looking for someone with additional perspective around concepts like customer lifetime value, churn rates, and member engagement.
That’s right, you came into Xbox knowing a lot about subscriptions and mobile phones from your time at T-Mobile. Let’s talk about what you learned about subscriptions and video games along the way to the current 10 million subscriber base. I’m sure a lot of developers were worried at first that subscriptions would cannibalize their game sales, for example. What have you seen happen to revenue?
The short answer is that it went way up. In the old model, a game used to earn 75% of its revenue in its first two months. Today a subscription-based game takes about 24 months to earn the same amount. And that’s a good thing, for a couple of reasons. First, a lot of these games have in-app purchases, so the longer people play, the more they tend to buy. Second, as I mentioned earlier, successful games have a community effect. They actually grow their audience over time, which is kind of surprising when you think about it relative to other kinds of media. Revenue per user might be lower when compared to the old model, but that’s offset because the audience has increased by an order of magnitude.
Did you see any shifts in gaming behavior? Do people think differently about games when they consume them on an access model?
Oh, definitely. Discovery has gone way up, for example. People feel free to try out all sorts of new games, because the pricing barrier is so minimal. For example, we have a great puzzle game called Human: Fall Flat. Sixty percent of the people who play this game have never played a puzzle game before. And forty percent of them go on to buy another puzzle game. So the subscription model has completely changed gaming behavior. It’s made people more open to trying new experiences. It’s also starting to open up our demographics. There’s greater racial diversity, greater income diversity.
It goes back to that idea of games as places to explore and create. And games as places that allow people to connect with each other. A few years ago there was a lot of hype about VR enabling all sorts of virtual environments, but the fact of the matter is that it’s happening right now. The social connection isn’t a byproduct of the game anymore. It’s the main feature.
Right. If you and your friend have Xbox Game Pass, you live in a world where you have a shared library of over 100 games, all the time. So you always have a neighborhood to hang out in. In fact, starting September 15, Xbox Game Pass Ultimate members can play more than 100 games from the cloud on their Android phone or tablet. There are really no barriers anymore.
The COVID crisis is a massive accelerant for change, and gaming is obviously a huge part of that story. Thanks, Sarah!
Thanks, Tien. Any time.
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This is the worst financial crisis since the Great Depression. Every sector of the economy is being hit, and technology is no exception. An online tracking spreadsheet shows approximately 25,000 startup workers have been laid off so far. The general sense is the world is falling apart. But my conversations with other subscription companies have been different. In fact, often the conversations have been about how much growth will slow, as opposed to how much revenues will fall.
This dichotomy is even more apparent in the data included in the Subscription Impact Report we released this past week, which compares subscriber acquisition rates in the month of March to the previous 12 months. The results are fascinating — you can read the entire study here.
The headline is this: Subscription-based businesses are proving very resilient in the face of this crisis. Incredibly, almost nine out of ten companies in the study sustained or grew their subscriber base last month.
More than half of the companies in our study have not seen an impact on their subscriber growth. One quarter are actually seeing subscriber acquisition rates accelerate — they’re growing even faster than before. And of the remaining companies who are seeing their growth slow, half of those are still growing, just at a slower rate.
So why are most of these subscription businesses proving so resilient? Let me offer four primary reasons:
1. It’s much easier to renew existing customers than chase new revenue.
At the risk of sounding obvious, if you’re a product-based business, every quarter you start with zero. You’re constantly chasing new business. And if for some reason your customers stop shopping, your revenues plummet.
Subscription businesses, on the other hand, start with money in the bank. Instead of being at the zero yard line, and scratching and clawing their way forward, they start at the 50-yard line, and focus on preventing churn. Only then do they focus on finding new customers to surge forward. That’s the power of a renewal based model.
It’s very difficult to plummet to zero with this model. Your entire subscriber base would have to cancel.
2. Subscription businesses can scale on a dime.
Because of the nature of providing shared services, subscription businesses are built for scale. What do you think the accelerators in our study are doing right now? They know that we’re all at home watching our streams, reading our news, taking online classes, and videoconferencing. So are they just sitting back and enjoying all that usage? No way. They’re all in aggressive subscriber acquisition mode.
They are launching new plans. They are spinning up new bundles. Fender Play rolled out a 90 day free trial. Zoom launched a free service for educators. Pluralsight kicked off #FreeApril for online tech classes. Box flexes and says add all the users you need for the next 60 days, while we are all in lockdown. And news sites like the FT and the Seattle Times are dropping their paywalls for COVID-related articles, and taking advantage of the traffic to acquire new customers.
When demand hits, they can strike.
3. Subscription businesses know their customers.
Subscription businesses aren’t just selling stuff off shelves to strangers. They can take a look at usage data and adjust their service accordingly: look at all the virtual gym classes happening right now. The huge amount of customer insight inherent in this model allows for all sorts of creative thinking.
They can dial down as well. For example, restaurants and their providers are obviously hurting right now. As a result, the restaurant subscription app Resy is not charging its restaurants for two months. It also refigured its settings so that users can now “book” a take-out meal. Talk about a smart pivot! When this is all over, those customers will be there for them.
How much do you know about your customers if you’re still selling stuff in stores?
4. Subscription businesses have more levers at their disposal.
If you’re a product company in a downturn, the only thing you can really do is: try to sell more.
But subscription companies that focus on lifetime customer value can look into the future: if you help your customers now, build loyalty, and keep them longer, your value goes up! Like the Resy example, you can do this a number of ways: offer credits, new services, let folks suspend and resume. That’s way more beneficial in the long run than just pitching your product. Hence this model’s popularity in all sorts of industries.
As Romit Dey, a partner at PwC Consulting, notes: “Everyone is seeking ways to sustain revenues and fuel growth. The subscription model offers immense value through recurring revenues that promise predictability to the business. This is equally true for technology companies that struggle with lumpy deal flow and quarter-to-quarter fluctuations, and also for other non-tech industries such as industrial manufacturing, automotive and consumer products, which are all hurting right now. The question facing these companies is, ‘how fast can we get there – to some form of the subscription model in our business?’
What’s going to happen when this is all over? What will the new normal look like? Your guess is as good as mine. But one thing is certain: companies around the world are waking up to the power of this business model. So much for subscription fatigue. If anything, the present moment is a massive forcing function that is accelerating the widespread adoption of subscription-based digital services: telemedicine, usage-based insurance, online learning, remote work solutions, etc.
It’s also changing how we define what it means to be a modern company. As the legendary former Cisco CEO John Chambers, who took Cisco from $70 million in annual revenue to $40 billion at the end of his tenure, recently said during a conversation with March Capital Partners, “If I had to do Cisco all over, I would do it all as a subscription-based model.”
Amen to that.
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If you’re a subscription business that has avoided the worst of the crisis so far, the two most important assets you have right now are resilience and empathy. Things are undoubtedly hectic, but you’re not in a tailspin. You’re not wrapped up in an ugly knife fight for immediate revenue. You have the ability to not just empathize with your partners and customers, but also act on that empathy. You have a number of levers at your disposal. Because your finances are nice and stable and boring, your services can get creative and interesting. Your main goal right now should be to double down on your subscriber relationships, but depending upon how this current crisis is affecting your company, tactics can vary widely. D2C companies might want to open their services to help out more people at home. B2B companies working with vendors who are struggling may want to offer discounts or credits. There are lots of different ways to help. But guess what? You will benefit in the long run! Remember, it’s all about building lifetime customer value: if you help your customers now, build loyalty, and keep them longer, your value will rise as well. It all comes around. But let’s focus on what we can do right now. Here are some of the ways we’re seeing Subscription Economy Leaders do this. The Guitar Maker If you’re lucky enough to be seeing a surge in new demand for your service, your first instinct might be to capitalize on it. To ask for money. Don’t! Instead, embrace that new audience with a warm hug. Everyone knows Fender. They make amazing guitars and amplifiers. They also have a hugely popular video learning program called Fender Play. Last month, their management was brainstorming ways to help out folks stuck at home, and decided to offer a free 3-month subscription to their Fender Play tuition app to 100,000 people. The immediate demand was so high that they upped the quota to 500,000. And now, after reaching the half-million mark, the company has extended this offer to 1,000,000 learners! Today they’ve got a huge new cohort of new members that didn’t exist 6 weeks ago, and a significant percentage of them will turn into loyal subscribers for years to come. Win win. The Gym Chain What is a gym supposed to do in a lock-down? Just hunker down and hope that not too many people will cancel? One national chain took the opposite route. They decided to proactively suspend all of their memberships. It was a smart move that instantly freed them from having to field lots of cancellation requests, and kept their membership base intact until their facilities can open up again. Giving your customers the flexibility to suspend and later renew their subscriptions is always a good strategy. In fact, even during good times, we've seen that companies offering the option to suspend and resume have an average churn rate of 25%, compared to 30% churn rate for those that do not. The Restaurant Reservation Service With restaurants taking a serious hit these days, the back-end reservation service Resy decided not to charge any fees to their restaurants or consumers for a couple of months and refund the restaurants they already charged (and they made this decision early, way back on March 9th). Not only that, but they switched their service from handling reservations to handling take-out and delivery. Talk about pivoting on a dime! They’ve also got a great blog promoting great take-out options as well as restaurants that also sell groceries. Consider giving your subscribers a free pass for a few months by issuing credits or term extensions. If your finance department can issue these balance adjustments without spending time manually processing each one, this should be a pretty straightforward effort. The Meditation App Many subscription companies are taking the opportunity to extend free offers to populations that are being particularly affected by the crisis. The wildly popular meditation app Headspace, for example, is offering free access to all US healthcare professionals working in public spaces through 2020. All you need is a National Provider Identifier (NPI) and an email address. They’ve also opened up a number of guided meditations to everyone called “Weathering the Storm.” Being a good corporate citizen doesn’t just mean volunteering and making donations to worthy causes. If you have a service that you think people on the front lines of this crisis will find worthwhile, give it away, give it away, give it away now! The Online Learning Company Every sector of our economy is hurting right now, and the technology industry is no exception (that grim spreadsheet of startup layoffs is now at 30K and climbing). Now might be a good time for IT folks, developers, and data professionals to brush up on a skill set, or pick up a new coding language. That’s why the online tech education company Pluralsight is offering free access to its entire Skills platform this month: over 7,000 technology courses available for free, with no credit cards required, and no watch limits. They’ve essentially suspended their entire business model for a month! Imagine Netflix trying something like that. It’s pretty amazing. The idea is to stay home, stay safe, and skill up. The Developer Platform Particularly in the B2B space, we’re seeing a lot more need for service bundles that can accommodate bigger teams of remote workers. And now GitHub, which currently has over 40 million developers on its platform, is absolutely free for teams. The company had been planning a freemium option for some time, but the crisis made it a priority. They also lowered the prices of their enterprise services across their entire customer base. Existing customers will have their bills automatically reduced going forward. Make it easier for bigger teams to take advantage of your service. Be like GitHub. Be a good host. The Car Marketplace CarGurus is a research and shopping resource that lets you compare local listings for new and used cars, and puts you in touch with a dealer if you find a car you like. They work with thousands of dealerships across the country, who are obviously being affected by the crisis right now. So what did CarGurus do? They immediately issued a blanket 50% discount to all of their automotive partners in March, and then extended that offer through May. “We are doing everything we can to continue helping our customers manage through this period,” said President and COO Sam Zales, “including connecting dealers to shoppers so they can hit the ground running when the situation settles and shopper behavior returns to normal." Amen to that. Got any examples of other subscription businesses that are being creative with payments and service offers? Share them with me below. I'd love to hear about it!
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It’s a stressful time, to be sure. What’s most top of mind right now is keeping each other safe, and doing our part to avoid the spread of COVID-19. But given how the health crisis is spilling over into the broader economy, I’ve been getting a lot of questions about how to think about this from a subscription business perspective. Here’s my short take: it’s time to double down on relationships.
If the Subscription Economy is about anything, it’s about a fundamental return to relationships, as opposed to transactions. A long time ago, we used to know all the people who made the things we bought and sold. Many of those relationships got lost over the last 100 years, but today they’re back (just in a digital format), and more important than ever. At its core, the Subscription Economy is about designing your organization and business model around those relationships.
Outside of the immediate health concerns, I’m also mindful of the fact that jobs and businesses have already been disrupted, which is very painful. Hopefully I’m offering a constructive assessment of the situation based on the interests of the readers of this newsletter. So let’s take a look at the current crisis from three perspectives: existing subscription providers, individual subscribers (e.g. all of us), and those companies that have not yet made the switch.
First, if you’re running a subscription business that hasn’t been immediately affected, you are probably grateful for the power of recurring revenue to help you weather this storm. Unlike one-off sales, you can count on recurring revenue as a stable base of future income, and you are not looking at a precipitous drop in revenue and the need to slash expenses to match. That’s great, but please don’t take it for granted. Now is the time to double down on the customers that have gotten you here. Reach out to them. Continue to provide value and innovate. Consider doing something special, like Zoom’s free K-12 School Program. Also realize that many of your peer businesses are suffering, whether they manage subscriptions or not. You are part of a community, so take care of that community.
Second, as an individual subscriber, if it’s at all possible, please continue to support the services and organizations that you like and find worthwhile. You’ll want them to be here when this is all over. By working hard, listening attentively, and doing their best to keep you happy, these businesses have also been loyal to you, so please try to support them. And given that companies like Netflix and Spotify will be fine, if you have the resources, now might also be the time to consider upping an annual subscription to a humanitarian non-profit. I’ll be writing more about non-profits in the future, but notice my emphasis on “subscription” as opposed to “donation.” Give the gift that keeps on giving.
For larger businesses who are relatively new to digital services, or are just beginning to test the waters, now is a good time to move forward. Why? Because you’ll want to have these services ready to go when the economy comes roaring back. Nothing about this moment changes the broader macroeconomic shift towards subscriptions and services. If anything, these days we’re rediscovering the importance of digital services both at work and at home. So here’s the question to ask yourself: do you want to be the company that’s asleep at the line when that starting gun fires again, or do you want to be ready to take off running?
Here’s a quote from a recent McKinsey paper called “The CIO’s moment: Leadership through the first wave of the coronavirus crisis” that I found worthwhile:
We know from past crises, in fact, that companies that take a slash-and-hold approach fare worse than those that both prune and thoughtfully invest.
CIOs need to take a through-cycle view and stay committed to broader transformation goals they’ve been leading such as programs on data, cloud, and agile…The goal for CIOs is to emerge from this not having just “managed” the crisis but being stronger because of it.
For this reason, it’s important for CIOs to keep a steady hand on initiatives and programs that can help the business become tech forward.
Finally, if you are a local business that doesn’t currently offer a monthly subscription or membership plan, please consider doing so. You have loyal customers that would love to support you, so a membership model makes sense (Fivestars is a Zuora customer that does great work with local businesses). Turn those happy customers into happy subscribers. Ask people to subscribe to your bar, your coffee shop, your restaurant, your store. Set yourself a goal to turn ten percent of your revenue into recurring revenue by the end of the year.
Just as a thought experiment, think about how you would run your small business “as a service.” A tier-based plan might make sense. If you’re looking for a great case study, check out Keep It Cut, a chain of subscription-based barbershops in Phoenix. They have monthly haircut plans starting at $29 a month for the Regular (unlimited haircuts) all the way up to $44 a month for the Whole Hog (unlimited haircuts, washes, and grooming).
Build those relationships. Support, or if you can, subscribe to your local businesses.
Do you know of any small businesses that are currently offering subscription plans?
Tell me about them in a comment below.
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