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Marketing a Subscription Business—The 7 New Rules for Success

Posted: 07 Sep 2019 09:35 AM PDT

By Nkiru Asika

We used to think of subscriptions as mostly for newspapers and magazines, but today you can subscribe to get makeup from Birchbox, mental health counseling from Talkspace, entrepreneurial wisdom from Mixergy, or even a coffee subscription from Burger King. Subscription-based companies have become increasingly competitive as more companies are introducing subscription-based models into their traditional businesses or launching new subscription-only services.

From software to healthcare, e-commerce to education, insurance to entertainment, almost every industry is embracing subscriptions. The Subscription Economy Index shows that subscription-based businesses are growing five times faster than the S&P 500 and five times faster than U.S. retail sales.

Driving this growth are a number of factors including:

  • Ongoing consumer shift from ownership to access—we're just not that into owning stuff anymore
  • Dynamic development of cloud computing and networked devices
  • Continued expansion of mobile technology

New rules apply

Viewing a subscription business through the lens of a traditional business doesn't work. The recurring revenue model of a subscription business affects everything from packaging and pricing to billings, operations, and more. And when it comes to marketing, bringing the same old, same old to the subscription game will cause you problems.

A paying subscriber (or member) is different from a regular customer and has a unique relationship with your business. Here are seven key reasons why marketing to subscribers requires a different approach:

1. This is an ongoing relationship, not a one-time thing

Some people think of subscriptions as simply a series of repeat purchases. However, in a subscription business, the initial sign-up kicks off an ongoing relationship, which then needs to grow in both depth and quality for the business to thrive. Successful subscription companies continuously nurture and engage their customers to keep them committed to the relationship. This is their only path to profitability.

In her book Subscription Marketing, author Anne Janzer points out that subscribers need a different kind of convincing. Since they are signing up for an ongoing relationship, they need to trust a company beyond the level required by a regular customer.

A one-time customer just needs to believe in your product, but a subscriber needs to believe in your entire business—your values, your purpose, and your long-term viability. Gaining subscriber trust and eventual loyalty is how you convince them to renew, to refer, and to upsell to higher-priced services.

Marketing’s role is to nurture value and sustain that trust; this also requires cooperation among other areas of the business, including customer support and sales. According to Janzer, "Marketing creates the promise. The whole business fulfills it."

2. Customer first is not just a slogan

Many companies tout "customer first" slogans that don't amount to much. But for a subscription business, customer first should be a solemn oath. If you don't develop a long-term relationship with your subscribers, then it's sayonara, baby.

Subscription marketing goes beyond promoting your product's fancy features or even how your service will improve your customers’ lives. As membership marketing expert Robert Skrob points out in his book Retention Point, it's harder to recruit members or subscribers than to win customers because nobody actually wants a subscription. We would rather get the solution to our problems or the full benefit of whatever service we are buying immediately, not spread out over 12 easy payments of $29.99.

So, a subscription business must continuously prove its value and remain laser-focused on making subscribers happy. If you take your eye off the prize (customer happiness), subscribers will exit stage right and you'll be left battling churn rates that will make a mockery of any growth in new sign-ups.

3. Forever vs. one-time transactions

Traditional businesses revolve around one-time deals, but subscription businesses are about the "forever transaction" of recurring revenue. Immediate revenues are usually low or non-existent; for example, SaaS free trials. In fact, subscription companies take an average 3.1 years to break even. Your subscription business profits as the new subscriber relationship grows, not from the primary purchase. What matters most is the lifetime value of that customer.

4. Forget the funnel

The subscription business model flips the script on the classic marketing funnel which emphasizes lead generation and conversion. Subscription customers aren't following a linear path from acquisition to sale. They are in a continuous journey of nurturing, upselling, referrals, and renewals.

A sale in a traditional business literally "closes" the deal, but for a subscription company that initial transaction is just the starting point. For the subscription marketer, the real hustle starts after the sale. This is when you work to get that new subscriber fully on board. You need to feed subscribers with the content and messaging that empowers them to be successful with your product; you need to encourage them to stay with your service, and then to increase the amount of business they do with your company.

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5. Think retention, not acquisition

Traditional business owners are obsessed with getting more customers through the door; acquisition is the name of the game. Sell as much as possible, for as high a price as possible, to as many people as possible.

For a recurring revenue business, gaining new customers is important, but it is also critical to hold onto the customers you already have. "Activity and retention is what makes your business successful, not sign-ups,” according to Des Traynor of Intercom. “Focus on how you get people to stick around and use more of your product."

Retention is the key. If you can hold onto subscribers, your company will have:

  • Growing revenues from subscription fees
  • Higher profits stemming from greater upsell opportunities
  • More referrals as happy subscribers promote you to their network
  • Greater customer lifetime value which will allow you to invest more in acquisition

6. Battle against churn

Churn (the act of dropping out of the subscription) is a sharp thorn in the side of every recurring revenue business. Every company wants to hold on to its customers, but the stakes are much higher for subscription businesses.

Smart subscription marketers need to be relentless in the battle against churn. They have work to retain customers as if their business depends on it—because it does. Being complacent about churn could create a scenario where the number of customers dropping out in a particular period is equal to the number of new customers coming in.

Curbing churn won't just happen on its own, no matter how many people appear to like your product. So, don't confuse enthusiastic free trial sign-ups as a predictor of retention rates. Retention (which is the opposite of churn) rests on your ability to keep subscribers happy and actively using your product.

7. Onboarding is mission critical

The first step to retention is to successfully onboard new subscribers. Help them achieve success quickly and get them into the habit of using your product. Your goal during onboarding is to nurture these new customer relationships and remind subscribers of the value proposition of your service:

  • Why does your product exist?
  • Why did they subscribe?
  • How will their lives be improved by using your product?

Also monitor subscriber usage and behavior closely. When customers are ticked off, they are more likely to cancel their subscription than to lodge a formal complaint.

Finally

Marketing to a subscriber (or member) is a very different ball game from marketing to regular customers. Lead generation and conversion is only half the battle.

If you're growing an online subscription business, you need to:

  • Build and nurture long-term relationships with your customers.
  • Make retention your key metric.
  • Focus on growing your customer lifetime value.

RELATED: 5 Generous Ways to Thank Your Most Loyal Subscribers

About the Author

Post by: Nkiru Asika

Nkiru Asika is a marketing strategist and conversion copywriter who helps SaaS and online subscription companies drive growth through retention. Her K.E.E.P. marketing system uses email-driven copy and strategy to target the right customers, nurture relationships, and build loyalty. Nkiru is based in Toronto but serves B2B and B2C subscription service companies anywhere in the world.

Company: Copybooster
Website: www.copybooster.com
Connect with me on LinkedIn.

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Is Your Business Ready to Make a Positive Change in the World?

Posted: 07 Sep 2019 09:20 AM PDT

“The American Dream is alive, but fraying.” This is a quote from Jamie Dimon, Chairman and CEO of JPMorgan Chase and Chairman of the Business Roundtable. Dimon is one of 181 CEOs that signed a Statement on the Purpose of a Corporation in August 2019. The new statement pledges to rescue the American Dream with the CEOs committing to lead their companies for the benefit of all stakeholders.

Who is considered a stakeholder? Since 1997, corporations existed principally to serve shareholders, according to the Business Roundtable's Principles of Corporate Governance. Under the new Statement, stakeholders now will also include customers, employees, suppliers, and communities; shareholders will no longer be the primary focus.

Under the new Statement, corporations will continue to lead for the benefit of shareholders, but shareholders will no longer be the primary focus; stakeholders will also now include customers, employers, suppliers, and communities. Companies will be investing in their employees and communities, allowing them to create a new standard for corporate responsibility, and ultimately becoming more successful over time.

While this messaging seems to demonstrate that corporations are moving in a direction where they are able to build long-term value, we also know Rome was not built in a day. Committing to all stakeholders is a major change. Pivoting towards that change will likely be done in gradual doses, and companies will need to stay committed to the new purpose.

What happens if you are not one of the 181 companies that signed off on the statement, but are inspired to redefine your purpose? What can your business do to make a change as soon as today?

Consider forming a Certified B Corporation

As a Certified B Corporation, your business is not trying to be the best in the world; rather, it wants to be the best for the world. The best way to reach that goal is to form a Certified B Corporation, an entity committed to using business as a force for good.

When a business commits to upholding a specific social or environmental purpose, it is subsequently held to a higher standard than general LLCs or sole proprietorships that do not. This is where B Corp certification comes into play. In order to be recognized as a Certified B Corp, a business must meet the performance and legal requirements set by the nonprofit organization B Lab.

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The following is a brief primer of what’s entailed in becoming a Certified B Corporation:

  • Take the B Impact Assessment. Also known as the BIA, this is a free test that helps businesses measure and manage their social and environmental impact. Questions in the BIA allow test takers to assess what they can do to build a business that is better for its workers, community, and the environment. Businesses that genuinely want to become a Certified B Corp must receive a full impact report, which takes about two to three hours to complete, and receive a minimum passing grade of 80 out of a possible 200 points. What happens if you receive a passing score? You will then be scheduled in for virtual assessment review with a member of the B Lab staff. During this time, you may need to provide further documentation that demonstrates how your business will commit to its specific purpose.
  • Meet legal requirements. Certain changes may be necessary, especially if the business has incorporated under a different legal structure. You may need to adopt a benefit corporation status and update articles of incorporation before you can become a Certified B Corporation. If your business has board members or a legal counsel, they must also be notified as to whether there are any implications in making the shift. Board approval is necessary when becoming a Certified B Corp.
  • Sign the B Corp Declaration of Interdependence. By signing this declaration, businesses are committing to also “walk the walk” as a Certified B Corporation. Their corporation is purpose-driven and conducts business as it matters for people and places. As such, the business must not harm anyone and should benefit one and all.

Review—or revamp—your mission statement

The purpose and values of an organization may be found in its mission statement. This statement should clearly articulate what your business does for its customers, employees, and owners. It may even go further by saying what you do for the community and, ultimately, the world.

Since mission statements naturally commit to all stakeholders, it's important to review yours periodically. This allows you to see if the message still resonates with audiences and make revisions as necessary if it does not. Here are a few key elements of your mission statement to review:

  • The company narrative. Mission statements often tell a story with the help of characters (in the form of customers and employees). While you may be inspired by the mission statements of major corporations, do not model your mission off of an existing statement. Your mission statement should be entirely unique to your business and its offerings.
  • Meaningful words. Mission statements are often short and succinct, so every word counts. The best way to convey your purpose is to use meaningful words. These words may be exciting and inspire your audience to take action. Conversely, some of the most meaningful words used in mission statements—such as "belong"—are often simple ones.
  • In the moment. Unlike vision statements, which look toward the future, mission statements only addresss what will happen today. They cannot promise their stakeholders the moon if they know they cannot deliver on that promise. Instead, they must be able to commit to what can be delivered in right now.

Encourage feedback from your team

Employees are also stakeholders, and one of the greatest assets your company has. Connect with them when redefining the purpose of your business. Encourage them to provide you with feedback, finding out where you can invest in their needs and implementing their useful feedback wherever you can. You'll find that your business will be able to build long-term value and stay committed toward redefining its purpose much sooner if you simply ask your team for their honest feedback.

RELATED: Small Businesses Can Give Back Too: You Don't Need to Be a Corporation to Practice Corporate Social Responsibility

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