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Why subscription/service models are preferred for scalability

Posted by The Odigo Group on March 22, 2018 9:00:00 AM PDT
The Odigo Group

When we are faced with an obstacle in life, who do we turn to? Someone we trust? Someone we know we can count on? Someone we have a positive relationship with? Yes!

We rely on our relationships with others to find security in our actions and decisions. It takes work to earn someone’s trust. And once we do earn it, we must take care to preserve it, because trust can be lost in an instant. Just as we must work at and protect our relationships, companies are also learning that investing in positive relationships with their customers far surpasses a good sales pitch.

Moving from transactional sales …

In years past, companies advertised a product to attract a consumer, made the sale, and the relationship ended there—until the next transaction. It could possibly be the last time they saw the customer unless, of course, the customer returned because of a complaint. Revenue was generated one sale at a time. For an example, we used to drive to the local movie store to rent a single movie. We would take it home, watch it, and then return it to the store the next day. While that method of transaction worked, we were limited to only being able to rent that movie when we were in close proximity and IF it hadn’t already been rented by someone else. There was no guarantee that we would go back to that same movie store in the future, and if we did go back, there was no guarantee the movie we wanted would be available. This type of transaction leaves the company without a sale and the customer without a desired product. Because of this dilemma, many companies have changed the way they seek customers to generate sales.

… to subscription sales …

There is a new trend in the way that companies want to grow and scale their businesses. Through a subscription-based service model, businesses focus on building their relationship with their customer so that the customer invests in their product or service over a designated time span. These models guarantee a certain amount of revenue for a company while the customer is guaranteed a product or service that they want. Both parties benefit. Think about it. You can find a subscription for virtually anything … Shave Club with new razors delivered to your door every month; Blue Apron provides fresh meal kits weekly; cosmetics, clothing, and so on. These are all services where you can pay the same amount every month and know you are going to receive a desired product in return. The business can control the terms of the subscription while the customer obtains their product without question.

Take the Amazon Prime subscription service. For an annual fee of $99.00, consumers receive unlimited access to qualifying Prime TV shows and movies, along with free shipping on any Prime order from the Amazon website. Furthermore, Amazon has cloud storage, where Prime members can store unlimited photos, freeing up storage on their personal cellular device. Members also receive access to a variety of books and magazines that they can download and read. Prime members get these perks all from the comfort of their homes. Not only that, but when customers travel, they simply need their user name and password and they have access to their Prime account. With this subscription service, Amazon has guaranteed revenue and the customer has a guaranteed service.

… helps increase scalability …

How does this lead to business scalability? When there are subscriptions, businesses can predict their volume and make decisions to scale resources up or down as appropriate. There may be times throughout the year when a business can hardly keep up with the demand of their service and other times when businesses rely on profits or subscriptions to remain viable. Additionally, it allows a company to outsource as necessary, which may be important to seasonal businesses. The subscription service model works across most business sectors, with new “something-as-a-service” models emerging daily. For example, with a subscription model, Amazon is almost guaranteed that their Prime members will go to the Amazon website first if they want to buy something. As we all know, Amazon offers a wide selection of products that may not be found in stores, and members receive free two-day shipping on their orders. Amazon is benefiting from the yearly subscription fee and the sales from their website throughout the year. As you can see with this model, consumers get more for their money, and businesses have a long-term customer; therefore, businesses have more confidence to grow as they desire. There is trust between the consumer and the product or service being purchased.

Leverage marketing as a scalable, subscription-based service model …

By using social media, Amazon can showcase deals on certain products throughout the year. This is especially apparent during holidays. Not only are members able to view product deals on social media channels, they can also choose a product directly from certain social media channels, such as Twitter, and have it placed in their cart in that same moment.

There are perks to businesses adopting a subscription-service–based model for marketing services. Many businesses find it beneficial to outsource their marketing for a short time because hiring employees is costly. When a business hires an employee, it not only has to pay their salaries, but employment taxes, L&I, insurance, benefits, and incentives. Furthermore, marketing agencies stay abreast of the latest trends in marketing—digital, social, video, and emerging trends—so that the client’s business doesn’t have to research and gamble on which communication channels would be the best fit to communicate their important information. And, for those companies that need a partnership where consulting firms work as team members who provide outstanding service, Marketing-as-a-Service (MaaS) is ideal. If you would like to know more about MaaS, check out our blog here.

When a business incorporates the MaaS model into their marketing strategy, there is a value-added service differentiator on top of having consultants who act like team members. The ability to add the analytics tools, the business intelligence, and the predictive analytics—essentially, data from campaigns—enables marketing consultants to make recommendations in real time to help companies pivot campaigns to be successful. The MaaS model goes above and beyond just delivering a pitch deck, brochure, or an event. As service providers, consultants take the data they gather and align the client’s marketing strategies into marketing automation tools. The transition enables consulting firms to make smart recommendations for their clients … an invaluable service during the launch of a new product, campaign, or big event.

… so you can focus on what really matters—customer relationship building

By subscribing to Amazon Prime and becoming a member, not only do members receive several perks, but if they are not fully satisfied with a product, they can return it for free. This gives members confidence in the products they purchase, as Amazon absorbs all shipping costs. Trust is established between the customer and distributor.

You see, in the same way that a consumer prefers to stream on-demand movies, books, and products today, companies like to have the option to access on-demand marketing services without having to scope a new charter of work every time a campaign ramps up.

Building a long-term relationship with a MaaS consultancy firm provides the most scalable and cost-effective option for outsourced marketing services for small or enterprise-sized businesses.

Not only does MaaS support a positive client-to-consultant relationship, it also provides more time for the client to focus on the things that really matter—building their own relationships with customers. This type of investment is crucial for clients who want to close sales with a customer base.

Topics: Consulting, Channel Marketing