vindicia lp

Make business decisions out of confidence, not fear

Too many executives hold their businesses back out of fear. They're reluctant to do things like raise subscription prices or eliminate underperforming features, expecting such a move will cost them valuable customers. However, to operate successfully on a subscription billing model, companies need to be proactive and make changes when necessary. Boldly making strategic decisions with confidence is what propels a company forward.

Common fears among subscription services

Companies afraid to raise prices might fear situations like the one Netflix recently dealt with. Despite announcing its price increase over several months and grandfathering in existing subscribers, the company experienced unexpected churn during the second quarter of 2016. In addition, MarketWatch reported Netflix only added approximately 1.7 million subscribers despite expectations the company would add 2.5 million. New customers in the U.S. only totaled 160,000, the company's lowest quarterly total since 2012. 

Other subscription services fear their customers will leave if given the option. In response, they make it difficult for customers to cancel their service. For example, Mic recently reported on a political candidate whose donation website provided no clear instructions for cancelling a recurring donation. In fact, the only obvious move donors could make was to update their payment information. 

No business wants to risk churn, but customers see complicating the cancelation process as a dishonest business practice and, as Mic revealed, will take to the media to protest. This can greatly damage a company's image in the public eye. In addition, frustrated customers will feel they have no choice but to dispute the charges with their card provider, increasing the number of chargebacks against a company.

Deciding with confidence

These common fears are why many companies either fail or don't see the gains they hope. One of the keys to combating them is market research: surveying customers to see what they want. 

The success of any research endeavor relies on the data. Companies need reputable information, not anecdotes or sensationalized news. Much of this data can be obtained through a third-party service, but companies can also use insights gleaned from their subscription billing service to understand their existing customers. 

Still, research can only get a company so far. Business leaders must get out of the mindset of assuming customers will have the least-desired reaction to every move they make, whether that's raising prices, providing a cancelation process or switching completely to subscriptions.

These businesses can follow in Adobe's footsteps. The company switched from selling licenses to operating on a subscription-based software-as-a-service model. Despite the initial customer uproar, Adobe has successfully operated on subscriptions for the past few years. According to a June press release, it reached a record-breaking $1.4 billion in revenue for Q2 2016.

Adobe's success shows companies can make what appear to be unpopular decisions that, in the long run, work out in the customer's favor. Other businesses shouldn't be afraid to follow suit and make similarly bold choices.

About Author

Understanding the scope of online subscription services

Previous blog

Subscription billing is the new normal

Next blog