Top things to consider when establishing a subscription model business
by Niclas Lilja, on Jan 4, 2018
When traditional software companies transition to subscription model, or a new tech startup establishes a subscription model business, there can be a lot of challenges. It can be hard to know how to prioritize what can feel like an endless to-do list. But we’ve rounded up our top things that new and transitioning subscription based businesses should think about to ensure a smooth set up and launch from the start.
1. Who are your customers or potential customers and what would they look for in a subscription offering
For those of us in the software and SaaS businesses, we often create what we do to solve a problem, or provide a service that people need. But it’s not enough to just say that if you build it, customers will come. Your online subscription services, and subscription management should be effortless for your end users. That being said, you need to do your homework on the features and price points that will be attractive to your targeted audiences.
Before you launch your website that likely includes information about your subscription tiers and monthly plans, you can use your background and industry knowledge to make some assumptions about what people will be looking for. But do some research in the form of beta testing, look for published reports on the state of online subscription service industries, or even ask your current customers what they would want in a new SaaS subscription model. Then, take the time to test your assumptions, and adjust your ideas.
2. You need to offer good customer support systems
One of the most important things that both B2B and B2C companies often forget about is establishing a great customer support system. While you can be eager to get your quality product or service out on the market, you need to consider what can go wrong, and be able to have a plan of action for managing problems, fielding questions and requests, and even answering happy customers who are eager to give positive feedback. And better yet, you should be planning for proactive support, in order to ensure success with your new customers and a smooth and painless onboarding.
Think about this: while competition is increasing across all markets, the differentiators between companies are no longer simply about quality and price. Consumers are increasingly making purchasing decisions based on experience. It can make a world of difference to holding on to customers if you can impress them with the level of service you show them, and your ability to manage issues in a friendly and efficient way. If you do not establish a good customer support system, or at least create a process for handling incoming requests and questions, you will lose your customers to the company who does.
In the subscription model business, we are often concerned with KPIs such as customer churn and monthly recurring revenue. One big key to reducing churn and improving MRR can often lie in your customer service. When trial customers feel they can rely on a good experience, they’ll be more likely to become a longtime customer. And when you can effectively help solve a problem for a disgruntled customer, their experience can make the difference in whether they decide to unsubscribe.
3. You need to think about user experience design
Just as with creating a customer support system, online companies need to think about user experience design. User experience, or UX design, is now a crucial component for how people interact with your company and online presence. You may have spent a lot of time making your product, service, or SaaS subscription platform include tons of features, but it won’t do any good if it isn’t easy to use or easy to find by your customer base.
In a subscription model business, typically customers are expecting something that is easy to use, and offers advantages in productivity or efficiency. When they lose too much time by not being able to set up your online subscription services quickly and easily, you could lose them as customers forever. A rule of thumb is to keep it simple. Not only should your platform be clean looking and intuitive to use, your website, your contact availability, and especially your customer support system should all be designed with user experience in mind.
4. Freemium models and when to start charging
With a surge in subscription services and subscription based business models, expectations can be high. Because of this, you need to consider what your draw is in your B2C or B2B sector that can show your quality and credibility, without people needing to make a big initial investment. One of the best ways to do this is through the freemium model.
Freemium model can be great for getting new customers into your system quickly, but there’s a fine line where you need to decide if 1) the model is actually right for your type of business, and 2) when you need to start charging. In the B2B world, freemium can mean certain free features, with payment required for “unlocking” bigger and better ones. Or, freemium can mean a month of free usage, with charging beginning in the second month. Look into how the freemium model might be able to fit into your subscription services, because you might find it to be an effective way for customers to get hooked on your platform.
It is important to remember that you should do what best suits your business and makes sense for your brand and business. If you’re working with large corporations or enterprise packages, it might make more sense to require an up front deal where customers need to put some skin in the game in order to ensure that they put in the effort for implementation and usage. The main point is to consider your options before you get too far in.
5. You want all your systems to work together, don’t overcomplicate things
When all is said and done, your business needs to run just as smoothly behind the scenes as your product or services platform works for your customers. When you don’t have your systems running smoothly together, you can run into issues where you aren’t capturing customers churning, or managing financials effectively.
Before your business gets too far off the ground, you should be establishing your internal processes for billing, enterprise resource planning, data reporting and analytics, and automation. Not having a good solution for managing these things together can create stress and chaos that can reflect back on your customers and subscriptions management. Keep things simple by implementing tools that can streamline or combine all of these systems into one place. That way you can spend less time focusing on these details, and more time on getting and keeping more customers.
When transitioning into a SaaS business model, or establishing a new subscription based business, there are many things to think about. But if you can stay customer-focused, build a great customer support system and user experience, identify the best ways to price and feature your subscriptions, you’ll be off to a great start.
Need some guidance on how to complete an effective transition? Our Checklist can help you through the step-by-step process for establishing a subscription business model.