The “Use It or Lose It” dynamic in the Subscription Economy means that if your customers don’t use your service, you’ll lose the customer, the renewal and the revenue. The relationship between subscriptions and usage illustrates this dynamic well. If a customer’s usage meets specific thresholds, the subscription revenues are retained at renewal. If usage climbs enough, subscription revenue growth can be generated by a new subscription tier or more seats. Similarly, customers with the most usage tend to expand their subscriptions to more complementary products. On the other hand, if a customer’s usage drops below certain thresholds, the first thing that occurs is tier or seat churn, which reduces subscription revenue. Ultimately, continued drops in usage lead to product churn […]
Archive | 2012
New Data for Managing Profitable Customer Relationships
In the subscription economy, the most critical customer relationship question shifts from “Was the product shipped?” to “Was the service used?” With this shift, a metric called usage data comes to the forefront. In a product-based business, product shipment is the fulfillment process for a customer relationship. But in a service-based business, with the offering delivered over time and on-demand, it’s not nearly as simple. A whole new set of questions come into the customer relationship equation; hence the need for usage data to inform critical decisions. So what is usage data? Usage data can be defined simply as “data about usage.” As figure 1 illustrates, it is the metered record of customer activity occurring at any given time. For […]
The Five Usage Milestones to Profitability in Customer Relationships
Creating profitable customer relationships requires understanding and monetizing customer usage. This road to profitability is connected by five usage milestones that must occur during the lifecycle of each customer. These milestones are driven by individual usage factors such as customer adoption, return on investment, and growth. But how do companies in the subscription economy leverage these factors when pursuing strategies to minimize churn and maximize customer lifetime value? Companies must have a clear understanding of the aforementioned usage milestones, and they must leverage usage data to create actionable segments for sales, marketing, and customer success teams who manage customer relationships. The five usage milestones are: Trial, Adoption, Renewal, Up-sell and Cross-sell. Let’s look at each in more detail. Trials Trials […]
Want to Be Profitable in the Subscription Economy?
The secret to profitability can be found through usage data. By “usage data” we mean data concerning customers’ usage of a subscription service. This metric is the basis for designing rate plans and billing usage charges. For example, if you look at your own mobile plan, the charges based on data, call time, and texting are prime examples of usage data. More specifically, they are all examples of metering, reporting and invoicing usage. In the Subscription Economy, massive volumes of usage data are generated daily for a service provider. This usage data captures utilization of features, content consumption and more at a user, contract and customer level. The companies that connect usage data to critical decisions in customer success, product […]
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