Is the Subscription Model Dead? (or “What Can Software Companies Learn from Newspapers?”)

5 Sep

Last week I was having coffee with a friend who is a technologist with a background in journalism, and he asked me the following question: “Do you think the subscription model is dead?”

I answered in the context of software with “No, I think it’s only starting. I actually think it’s going to eat the perpetual license model for lunch. Why do you ask?”

He answered in the context of media subscriptions with “Well, as good, free content continues to proliferate, then why on earth would people be willing to pay for it?”

Then it hit me (well actually, two things hit me: the first being that I should understand the context of someone’s question before I answer it, but the second one was the bigger “aha”): As much as SaaS companies talk about subscription management, and as much as everyone who gets their news from Twitter (like I do) loves to flog the newspaper industry about its impending death, there’s an incredible lesson here about subscriptions, and I heard myself say it when I answered his second question:

“People will pay for content, or anything, for that matter, as long as the incremental value of that content when compared to the free stuff justifies the expense. Personally, that means I’m willing to spend $99/year on The Economist or Harvard Business Review, but not $23 per month on the Wall Street Journal or $8.75 per week for the NY Times.”

…and the bigger lesson here is that the principle of value holds true across the board in the subscription world, whether you’re talking about software or media, or information. The more what you’re selling becomes commoditized (and information has now become the poster child for commoditization), the more you need to ensure that you understand whether your customers are getting value from what you’re delivering. If they don’t, you need to do something about it, or they won’t be your customers for long.

If you’re an early stage company, you’re likely focused on proving that your solution is better than doing things manually or better than using the solution that you’re disrupting. The role of Customer Success is somewhat “missionary”, just as the sales role is.  There’s quite a bit of evangelizing and proving that your solution is better than no solution, and you’re measuring adoption not just for the sake of your product’s adoption, but for the sake of validating that the market sees value in a type of solution like yours. In essence, you’re selling against the status quo.

If you’re a later stage company, on the other hand, your Customer Success function is more focused on proving that your specific product is delivering value and less about needing to convince the marketplace that they need a product like yours.  The tricky part for a later stage company, however, is that unless you can differentiate your offering (product and services), you risk being commoditized. And commoditized solutions are very tricky to service because the only differentiator in the customer’s mind is price, and competitors end up trying to poach each others’ customers based on lower prices in a race to the bottom.  That’s obviously a really crappy place to be, so if your product doesn’t differentiate itself, you really need to differentiate your solution based on the service you deliver. Your Customer Success mission should achieve the following:

  1. Empower your customers and provide them with value so that they have no legitimate reason to talk to your competitors or question why they’re paying what they are paying for your solution;
  2. Understand which customers aren’t getting value so that your organization can react appropriately. Do this quickly and frequently so that you’re understanding potential customer issues and patterns before they become deep-rooted;
  3. Understand which customers are either strong potential brand advocates or which ones are candidates for additional products or services and use both of those categories of customers to continuously “de-commoditize” yourself.

I guess there’s one more realization that I came to the other morning, which is that I can’t even have a cup of coffee anymore without thinking about Customer Success.

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