Stephen Hurrell’s Advice on How To Have A Successful Subscription Business
4 min read
The evolution toward revenue operations is particularly important for companies with a subscription-based business model. Conga’s Chief Marketing Officer Randy Littleson recently spoke with Stephen Hurrell, Vice President and Research Director at Ventana Research, about revenue operations and subscription management. Following are some key takeaways from their discussion.
Subscription-based models rely on long-term revenue
Randy: Companies are showing an increased interest in subscription-based revenue streams. Can you talk a little bit about the best practices needed to get this right?
“Many companies are looking to expand their product set or introduce new products through subscriptions,” Stephen responds. “For those who are accustomed to one-time sales, with a large selling organization focused on driving revenue through new business, this requires a shift in mindset. Rather than making sales the top priority, there is now equal weighting between selling, retention, and expansion.”
Because subscriptions are a recurring revenue stream, a subscription-based business requires more people to be involved with the customer throughout the relationship. While new sales are still important, companies need an increased emphasis on customer retention—both to preserve the ongoing revenue stream and to create opportunities for additional sales.
Keep things simple for your customers
Randy: As companies move toward a mixed pricing model (subscription, usage, etc.), they tend to encounter a number of process and data considerations. What’s needed to master these process and data issues?
Stephen answers, “Mixed pricing models tend to get complicated when it comes to billing. Your customer shouldn’t have to think too much about all the things that contribute to their bill. And they definitely don’t want multiple bills for the different products and services that they’re buying from you.”
One common example is consumer cell phone bills, which are typically broken into various parts. You might have an amortized charge for the cost of the phone itself, a flat fee for voice calls, and a data plan with both fixed and variable elements. It’s all one bill for the same phone, but there are different ways of pricing the associated products and services.
He continues, “Companies need to think about creating processes that present a unified front to the customer. In a subscription-based business, the customer can walk away at any moment. Your data and processes need to deliver a unified experience that encourages customers to stick around—and hopefully buy more of what you’re selling.”
Embracing an extended revenue team
Randy: As companies make the shift to subscription- and usage-based models, customer lifetime value becomes more important. In part, that means companies need to start thinking of customer experience as an integral part of driving customer lifetime value, rather than just a cost center. How can companies make that pivot?
Stephen replies, “I see this phenomenon in many subscription-based companies. They think in terms of the sales team and the ‘other’ team—including customer service and support—which is considered a cost center. In a subscription business, the customer team is directly supporting revenue. You would never think of a salesperson as a cost center; you think of them as producing revenue. You should have the exact same mindset when it comes to the support function.”
In a subscription business, the support and customer success teams engage with the customer on an ongoing basis and preserve the long-term customer relationship. That experience will determine whether the customer continues to renew their subscription, or even decides to buy more products and services from you.
Stephen concludes, “In order to succeed as a subscription business, you need to think of the support and customer success team not as a cost center, but as an extension of the revenue team—on par with salespeople.”
Keep teams focused on lifetime value
Randy: Clearly it’s important to think more holistically about customer lifetime value. Many companies are pivoting from sales operations to revenue operations, as a way to coordinate all those different teams towards revenue. What are the key considerations for that type of shift?
Stephen responds, “There’s a lot of talk right now about revenue operations and exactly how it’s defined. For me, revenue operations is both an approach and potentially a team. You don’t necessarily need a rev ops team to support a rev ops approach, but it helps.”
As companies move away from a sales-first mindset, many are organizing their revenue operations function into three equal branches: sales, retention, and expansion. That requires multiple teams to be involved in the customer lifecycle, including sales, customer success, and support. Marketing also has a role to play, as they’re responsible for communications that can introduce existing customers to new products, services, and opportunities.
“In making this shift, it’s critical to coordinate all those groups and keep them focused on preserving the customer lifecycle. That’s where a dedicated revenue operations team can be useful,” Stephen continues. “Depending on your organization, it could be a virtual team—with people from marketing ops, customer success, and sales operating as a team—or it could be an entirely separate team running revenue operations. The key is making sure they’re all working together against shared metrics that are designed to ensure customer lifecycle success.”
Revenue operations vs commercial operations
Randy: Another term that I hear a lot is “commercial operations.” How do you differentiate this from revenue operations?
“Revenue operations is a new term that has emerged within the last five years or so, while commercial operations has actually been around for quite a long time in certain industries,” says Stephen. “The type of industries where you’ll find commercial operations are usually those where there’s a clear delineation between the delivery of products or services and the commercial aspects of the business.”
A good example of this is healthcare, where the doctors, nurses, and specialists who work with patients and deliver care are separate from teams like finance and billing. The commercial side is still important, but it’s relatively detached from the actual delivery.
Stephen adds, “This is quite different from revenue operations, which requires pivoting from a singular focus on sales to a broader concept of revenue.”
To learn more and get first-hand insights, watch the full video with Stephen Hurrell and Conga CMO Randy Littleson.
This blog post is an abbreviated version of the video that's been condensed and edited for readability.