We do this all the time in our daily lives. We commit to a two or three year relationship with a subscription service. The cell phone you have in your pocket is probably on a three-year contract. For committing to being in a three-year relationship with your cell phone service provider, you get a screaming deal on the phone. And you get an enticing rate on the monthly plan. It’s also great for the service provider. They get to count you in as a loyal customer for the next few years and it gives them more revenue predictability.
What happens after the three-year commitment is up? The service provider just switches you to a month-to-month plan. Once that happens, then if you are like me, you start shopping for alternatives. You’re staying with the relationship you’ve established with your service provider, but you’re not committing to anything longer. You’re open to exploring what else is out there in the market.
This process of automatically taking a subscriber relationship from “active and committed” to “active but uncommitted” is a process every subscription vendor should design into their subscriber lifecycle. We see this type of a cycle in both B2B and B2C markets and subscribers have come to expect it.
In Zuora we have a specific feature that enables this. It’s called “termed-to-evergreen.” You can setup a subscription so that after an initial term of a certain period of time, it automatically transitions to an “evergreen”, or uncommitted relationship. The initial long commitment term gives your TCV numbers a boost, provides greater revenue predictability, and is enticing for the end customer by designing in the right incentives in exchange for that long term commitment.
Once the commitment is over, Zuora’s new “termed to-evergreen” feature does the following:
- It automatically switches a customer to a month-to-month “uncommitted” relationship
- Adjusts the forward looking subscriber metrics to reflect an “uncommitted” relationship
- It gives you the ability to send alerts to external systems and teams. You can use these alerts to begin marketing new “commitment incentives” to these customers