When Tien Tzuo, CEO of Zuora, sat down with Michael Krigsman on February 26, 2016 for a CXO Talk about the subscription economy, things got interesting! The conversation ranged from who’s making the shift to a subscription business (hint: everyone!), the challenges of transitioning to a subscription-based model, pricing implications, the organizational impact of this transformation, the subscriber identity record, capturing and using customer data, and more.
Tien Tzuo coined the phrase “Subscription Economy” and has spent the last 6 years since founding Zuora evangelizing the shift from organizations selling products to offering services. While championing the cause, he simultaneously built out Zuora’s award-winning platform designed to support this shift to a subscription-based business model and power any and all subscription businesses.
For the full discussion, watch the video below or check out the transcript.
Here are some highlights:
On the subscription economy: services over products:
What we’re seeing today is that people don’t want to buy products anymore. Why buy a DVD if you can get any movie and any TV show you want with services like Netflix or HBO Now? Companies are realizing this and they’re starting to go beyond the product and rethink what they do as a service offering for their customers.
On aligning with customer expectations and adopting a truly customer-centric point of view:
The profound change is to invert your whole business and start with the customer. The new economy is a relationship-centric economy. You need to build a whole picture of the customer and then craft that relationship in a way that allows you to deepen that relationship and turn it into revenue.
On subscription billing within the subscription economy:
The bill represents the customer relationship and, with the single act of billing, you can see the depth of the relationship: you can see the customer that’s going to churn, you can see other customers thinking about it – and you’re doing it on a recurring basis. Billing is the core of relationship business management.
On the subscription economy and manufacturing:
In the last two years we’ve seen the manufacturing sector shift. And what’s going on there is the Internet of Things. Companies are realizing that they’re going to continue to sell products, but they can layer on services – outcomes on top of these products – and actually deliver more value to the customer. Manufacturers are becoming service organizations.
What is the essence of the thing that people really want, and can I deliver it to them in a greater way versus selling them a product and saying “Well, you figure out how to get the outcome that you want from this product.” That’s what’s profound and that’s what’s transformational.
On starting to make the transition to a subscription business:
How do you hold on to the customer? Don’t worry about taking all the revenue upfront for the product sale, but how do you get them engaged with you over and over again, over a period of time and then how do you wrap your revenue model to reflect the value that they are getting from that engagement and experience.
On the greater transparency of the subscription business model:
And this whole idea of anonymity, where companies are selling products and they don’t know who their customers are, and their only goal is to sell as many widgets as they can – that model just doesn’t make any sense. The natural state is a relationship between a buyer and a seller, and so we believe that the subscription economy is making business more human and bringing the human aspect back to business relationships.
Check out the full video for Tien’s insights on the subscription economy including the three fundamental questions for growing your subscription business.
What do you think is the most significant challenge to thriving in the subscription economy? Tell us in comments below.