You may have noticed the rise in subscription services and business models – the likes of Spotify in music, Netflix in video and, of course, Dollar Shave Club in FMCG, which was recently bought by Unilever for $1bn.

On US-based My Subscription Addiction, a portal detailing available subscription services, there were 2,000 in operation as of March this year. And visits to subscription ecommerce sites have gone up 3,000% in the past three years. The average subscriber receives seven subscription packages and has at least 12 on their wish list.

Popular categories include beauty and grooming, food and drink, and pets. Although startups such as Graze (healthy snack boxes on subscription) pioneered this space in ecommerce, the bigger players are rapidly trying to play catch up: Walmart (Beauty Box), Starbucks, Macy’s and others.

Perhaps the most interesting is Amazon. In many ways, its Prime membership is a form of subscription. It aims to reduce friction and encourage repeat purchase and loyalty.

Amazon’s Dash buttons are also designed to make repeat purchase super easy. Amazon’s Fresh service for groceries, recently launched in the UK, is not strictly speaking a subscription service but it is close to that, aiming again to take away purchase friction for your weekly shop.

It seems even relatively low-consideration items that might not have regular or predictable repeat purchase cycles can work within a subscription offering. Printer ink is increasingly sold ‘as a service’ via a subscription model, for example HP Instant Ink.

These shifts in business model and proposition have implications, of course, for marketing.

Among the more sophisticated and mature players in digital subscription marketing and selling are SaaS (software-as-a-service) businesses. So what can we learn from SaaS marketing and models?

First, it is worth understanding the key business, and therefore marketing, metrics for SaaS.

If you believe you are selling something one-off, then you tend to think mostly about top-of-funnel metrics, and cost per acquisition (CPA) is based on a single conversion event.

In a subscription business, however, the key metrics are about usage, churn and yield, with lifetime value (LTV) and acquisition cost payback periods being the most important marketing metrics. If you have good loyalty, you can typically afford to spend more to acquire and keep customers.

Second, and this relates directly to loyalty and yield, successful SaaS businesses are obsessively product-centric. They focus on the product, for example not underestimating the importance of the user interface.

Marketing’s job becomes less about pushing out a message and more about listening to customers in order to help refine and improve the customer experience. This might include supporting customers with relevant and helpful content: Tutorials, demos, better product imagery and information, checklists, usage suggestions, tips, community and so on.

Third, service and support should be seen as a revenue source, not a cost centre. In the SaaS world, it is often said ‘customer success is the new sales’.

If your mindset is only a one-off transaction, then any support or service seems like a cost that detracts from the value of the sale you made.

As soon as you look at it from a subscription perspective, with a certain LTV and the opportunity to upgrade the customer to a higher-level subscription offering, service becomes a fantastic opportunity to engage with customers, delight them and increase their profitability and yield. I have argued before that service and support should be considered part of the marketing function.

Finally, we can learn from the culture and processes that SaaS businesses typically apply, not just to marketing but their entire operations.

Many SaaS services are not only subscription-based but also monthly, rather than annual, subscriptions. This forces them to stay good all the time because customers can leave as quickly as they arrive. They have to keep improving the product, keep the service levels high, keep comparing themselves to the competition.

This means their operational rhythm is ‘agile’, their culture is about rapid iteration, test and learn, about automation and scaling, about being ‘always on’. All things I hear marketing functions aspiring to become.

Perhaps it is worth trying to envision your product or service as a subscription offering if it is not already. Perhaps you should consider hiring a marketer with SaaS-type marketing expertise.

How might you do your marketing differently as a result?

For more on this topic, see:

Ashley Friedlein

Published 15 December, 2016 by Ashley Friedlein @ Econsultancy

Ashley Friedlein is Founder of Econsultancy and President of Centaur Marketing. Follow him on Twitter or connect via LinkedIn.

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Comments (1)

Toby Larocque

Toby Larocque, VP Operations in Nebucore at Nebucore

Thanks for sharing this valuable information.

about 1 year ago

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