Subscribed: Why the Subscription Model Will Be Your Company’s Future — and What to Do About It
Tien Tzuo with Gabe Weisert
Penguin Random House (June 2018)

How and why “the Subscription Model is transforming every sector of the modern economy”

With Gabe Weisert, Tien Tzuo has written one of the first books on a business subject that has fascinated me for many years: attractive alternatives to ownership after a purchase. Why did he write this book? Because he thinks “we’re in a pivotal moment in business history, one not seen since the Industrial Revolution. Simply put, the world is moving from products to services. Subscriptions are exploding because billions of digital consumers are increasingly favoring access over ownership, but most companies are still built to sell products. As a result, huge opportunities are up for grabs.”

For example:

o Renting or leasing a residence rather than buying it
o Using a taxi cab or Uber rather than buying a vehicle
o Renting a film from Netflix rather than buying it
o Outsourcing subscription order-to-cash services to firms such as Zuora
o Outsourcing accounting services to firms such as Quicken
o Outsourcing legal and hiring services to firms such as legalzoom
o Outsourcing hiring services to firms such as Indeed
o Outsourcing sales and marketing services to firms such as Salesforce

What does he recommend? “In working with hundreds of companies, we’ve learned that the solution to high growth  rate is to diversify your approach to growth and embrace multiple growth strategies. We’ve boiled it down to eight essential ones.”

Here they are the first four:

1. Acquire your initial set of customers. “What’s the first thing you need to do? Find the right kind of customers. Why? Because someday, your future customers will be looking very close at your first set of customers to gauge whether or not you’re really long-range partnership material…Second, it’s really important to avoid the temptation to ramp up a big sales force.”

2. Reduce your churn rate. “How can you tell if you’re running a successful subscription service? It’s pretty simple — you’ve tamed your churn rate. That marks the transition from adolescence to adulthood, from having a cool new service that people potentially might like to running a mature, successful business.”

3. Expand your sales team. At this stage, “growing means expanding your sales team — hiring more reps, getting more productivity out of your current sales team, and signing up more resellers and dealers.”

4. Increase value through upsells and cross-sells. “Eventually every company realizes that the best way to maintain growth is to increase the value you get from your customers. When you can upsell or cross-sell a customer into opting for more of your services, that’s a testament to the strength of your relationship. It means you’re aligned.”

All eight are thoroughly explained in Chapter 12.

I first became aware of the Subscription Model when learning about Electronic Data Systems (EDS), founded by H. Ross Perot in 1962. Its primary value was serving, in effect, as some clients’ IT department. Other EDS clients outsourced to EDS in what was among the first time-share plans that involves (you guessed it) electronic data systems.

Consider, also, what was once the National Association of Retired Teachers (NART), founded in 1947 by Ethel Percy Andrus, reconstituted as the American Association of Retired Persons (AARP) in 1958 under her leadership. It now has more than 38 million members. With that huge critical mass, AARP has immense leverage with prospective vendors whom it selects to provide hundreds of membership benefits that include all manner of financial products, domestic and international travel services such as guided tours of foreign countries, and a full-range of healthcare services. The Subscription Business model has enabled a teachers’ retirement association offering a few benefits (including a magazine subscription) to become an immense marketplace of products and services of special interest and value to people 55 or older.

Yes, this really is — or at least can be — what Tien Tzuo characterizes as “a pivotal moment in business history,” a time when subscriptions are the only business model that is entirely based on the happiness of customers. “Think about it — when your customers are happy, then they’re using more of your service, and telling their friends, and you’re growing. You get to start every quarter with predictable revenue. You get to make smart, data-driven decisions. You get to benefit from your own customer insights, which are a huge competitive advantage. We call this the world of happy business: happy customers, with happy companies, reinforcing one another, iterating forever, with no beginning and no end.”

Think about it….