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Marketing

Published January 5th 2016

Industry Insider: The Death of the Compromise is Coming

Tech Director at Grayling, Chris Owen, discusses his predictions for 2016 - starting with the demise of the customer compromise.

The subscription relationship between brands and consumers is shifting.

Increasingly detailed analysis of behavioral data is now giving more accurate insight into ever-more refined demographic sets within a customer base.

What this is driving is a shift from the ‘top-down’ subscription models companies offer, (and which consumers have to choose from), toward a more customer-centric, user-designed model that the business integrates into its portfolio of overall services.

This flip of the model is empowering consumers, and as data analytics continues to increase in sophistication, service providers will be looking to drive loyalty through more tailored, bespoke packages for niche audiences.

My prediction for 2016? The death of the compromise

Essentially, the era of the buyer having to pick from four or five bundles will come to a close – the death of the compromise and the rise of pick-your-own.

I asked subscription management software leader Zuora’s EMEA VP John Phillips what he thinks.

“There has been a massive shift in recent years in the way we – as both consumers and businesses – want to buy.

 

Today, we value the convenience and flexibility of subscribing, renting or sharing services through pay-as-you-use models, rather than buying products outright. This shift has been accelerated by the adoption of SaaS technologies, which has removed the focus on product ownership in favor of agile solutions.” 

 

John Phillips, Zuora EMEA VP

While this concept of the ‘subscription economy’ has been present for a couple of years, 2016 is looking like a year for the model to boom.


The rise of XaaS and the need to drive loyalty

Part of the success could be pointed toward the rise of XaaS (Everything as a Service) models, but increasing numbers of industries are looking at how to optimize the subscription opportunity.

Zuora’s Phillips continues, “This subscription economy is alive and well in the media (Spotify, Netflix, Financial Times), SaaS (Box, Brandwatch, Headspace) and IoT industries (Schneider Electric, GM OnStar, Nest), but also that less obvious sectors are pivoting to subscription business models that generate recurring revenue such as FMCG (Goodmouth, Dollar Shave Club), food and beverage (Nespresso, Graze) or beauty products (Birchbox).”

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The potential for brands to drive loyalty through strategic, personalized targeting is huge.

Imagine an OTT film service which knows when you watch films during the week, what kind of films you watch, and what time of day you usually sit down with your popcorn.

Now, consider how much stronger the customer relationship is if the service gives subscribers a reduced rate on their ‘film nights’, a standard rate elsewhere, and once a month a free film on the night of their choice.

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Partner up with a pizza delivery company to offer money off on film night and you have a personal, tailored, and hugely targeted contract.

If the customer is getting precisely what they want, when they want it, why will they leave?


Holding on to customers

Customer churn is an issue which affects all industries, and where there is no exclusivity of contract or reason-to-remain then customers will always be looking elsewhere.

Listening better to customers – through their behavioral data – and then responding with personalized plans can reduce churn without competing purely on price; a race to the bottom approach will only commoditize your product and reduce the perception of value on what you offer.

Chris is a regular contributor to the Brandwatch Blog. Find out more about Grayling by clicking here.


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