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? Please send me a note about them.
For more insights from Zuora CEO Tien Tzuo, sign up to receive the Subscribed Weekly here. The opinions expressed in the Subscribed Weekly are his own, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.
And check out his book SUBSCRIBED: Why the Subscription Model Will be Your Company’s Future – and What to Do About It.