“While you may be focusing on your direct competitors, they probably won’t put you out of business. Disruption is coming from across the globe, or from a company with a totally different business model.”
Robbie Kellman Baxter’s statement in his new book, “The Forever Transaction,” was written long before COVID-19 became the most potent global business disrupter one could never imagine. The recurring revenue that comes with a successful subscription model is the ideal shield against an economic downturn of any kind.
The subscription model has been a natural fit for B2B companies that sell software as a service (SaaS), but what about other B2B companies? While it’s true that more B2C companies than B2B companies have made the subscription model more of a staple, the concept seems tailor-made for B2B businesses, says Bob Moore, co-founder and CEO of the data mining companies Crossbeam and Stitch, Inc., two businesses that serve B2B customers through a subscription model.
“From accounts to authorizations, B2B buying is generally more complex than that of B2C. Once a customer has identified a merchant that knows their needs and makes a product that works, the prospect of vetting and switching is all the more overwhelming,” Moore states. “Subscriptions alleviate that anxiety by simplifying the customer experience. In a way, B2B purchases already resemble subscription models — customers usually buy products from branded manufacturers and distributors on a regular schedule and in bulk. B2B vendors have the opportunity to automate those repeat transactions, solidifying customer relationships to make them sticky over the long term.”
Assessing how close you are to a membership model is the best place to start, says Kellman Baxter. But it’s important to keep in mind that pricing a subscription or having an offering called a membership doesn’t mean you are thoughtfully nurturing long-term relationships with the people you serve or maximizing customer lifetime value. Subscription pricing by itself is not a business model.
You may have thought about the benefits of a subscription model for your company, but have you thought about what’s in it for your customers? Your goals and your customers’ goals must align. Kellman Baxter offers these benefits that attract and retain members:
- Cost savings
- Time savings
- Risk mitigation
- Readily available expert advice
- Premium (front-of-the-line) service
- Exclusive offers
- Broader range of choices
Leaders can’t just pay lip service to the strategy. They have to allocate resources and track the right metrics, Kellman Baxter says. “Many membership models fail because the organization lacks a strategic lead who builds a big picture vision that incorporates the entire organization instead of focusing on operational tasks. A team lead with credibility, seniority and a strategic orientation is a game changer.”
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