For months now you have heard the term “Subscription” floating around the offices. Over the next few months, you will see an increase in internal promotion to help you understand. This is not a “new product," rather it is a different business model than the one we have lived since Rauland sold their first product. I will come back to what it means to Lone Star Communications in a bit, but first let us start by explaining the why.
As a kid we had fresh milk delivered every other day. We never had to place an order; we only had to let them know they needed to stop to halt the process. In business to consumer sales, subscriptions have been a part of life longer than I have been around. In your everyday life: phones, TV, water, gas and electric are all examples of subscriptions. You are not buying a product, you are buying a service. You do not buy a generator (normally) to supply electricity to your home, you buy and use what you need from a supplier that has all the stuff to make electricity.
Just over a decade ago Microsoft stopped selling their software in boxes and moved to the cloud. Why? It was better for their end users, and better for Microsoft. Let us cover the customer experience first, then talk about the benefit to our company moving into this model of doing business.
By Microsoft moving to the cloud, many costly problems for the consumer stopped. The need to do backups and store them off site, the need to buy expensive servers and the maintenance costs associated with them. Piracy also stopped. You might not think that this is a ‘benefit’ to the consumer, but it is. As a business, we were liable for unauthorized reproduction of their software. A decade ago, Microsoft was taking countless businesses to court for piracy. This stopped with subscription.
In short, they placed the value on what it does and removed the burden of owning all the stuff you need to run it.
Their pivot to subscription based offerings lowered the bar as it relates to the “stuff” you need to pay cash for and support costs to run their applications, and instead placed the emphasis on making it easy to use their product and benefit from its value. Most of us do not care about the “stuff,” we care what it will do to improve our quality of life. I assure you that our customer executives are not interested in technology; they need us to help solve problems that they cannot solve on their own. Our value.
Now let us talk about how this applies to us.
For decades we have sold product. A decade ago, we faced very real threats from competitors a fraction the size of Rauland. Why? We had become labeled as a commodity. When you are a commodity market growth and selling in general becomes extremely hard. When the customer sees you as one of many comparable products, it is to be expected they will buy the least expensive. It is common sense. I will not spend more than I must if what I am about to buy is one of many like it. I will buy quality but go least expensive.
As an example, If I have a choice between Trane and Carrier for a new air conditioner (AC) for the house – I will go with the one that is less. Both are good brands; neither gave me a “value-based” reason to buy their brand over the less expensive option. By the way, I was a Trane fan for years. My last AC replacement went to Carrier as it was 1/3 less. A commodity purchase decision that was price based, not value based. Trane has a great brand, but their brand was not important enough to me to stay loyal when their value was no greater than Carrier. The only thing greater about Trane I saw was their price.
To successfully pivot to subscription selling, the value proposition (not the product) must drive the sale. This means the customer's perception of us cannot be a “box company,” but rather a company that can solve their key challenges and can prove it. 'The proof being in the pudding" is the key difference between a buyer making a tactical, price-driven decision versus a strategic decision. The greater Lone Star’s brand identity to the market is the transformational value we represent, and less about product, the more we are aligned with subscription selling success.
The higher our market value perception is, the more we will sell with higher profitably. The more you need it and can justify it, the more you are willing to pay. Common sense.
Dr. Montgomery and the CAS team are busy as heck helping us to drive this outcome for our company. In their work they consult, make process improvement recommendations and then they measure the change. With every documented story of positive transformational change, sales has proof to share with other hospitals experiencing the same issue and with high confidence they can see we can make their pain go away. Rather than selling hope, we are selling valuable outcomes that are evidence based. The more of this we do over time, the stronger our market value message becomes. The decision then is no longer a commodity decision, it is a value driven decision the customer is able easily make.
The more the market begins to identify Lone Star not as a product company, but rather for its ability to drive desired and measurable change for the consumer, the higher our value becomes. This drives profits and customer loyalty. It moves the needle away from Lone Star being labeled as a commodity. The more our perception of value grows, the easier it will be to become successful selling our solutions as a subscription. The more evidence we have proving we can solve what the customer can’t, the more we become a must have. When you are a must have you are not a commodity. Value and profits go hand in hand.
In closing, let us talk about the not so obvious benefit to the company. Selling a product once means we get to celebrate the sale, then start all over again the next month. This can be a roller coaster some years because precious cash is in high demand and in low supply, which is very hard to forecast reliably as it relates to cash flow. Subscriptions, on the other hand, are multi-year contracts supplying us with a regular and predictable stream of income.
What we have been living since March is a great example. When we went into lock-down so did our customers. Spending slowed. Granted (I pray) this is a once in a lifetime event, but you can see where having a high percentage of customers paying by subscription would favorably impact our business health. Regular payments and cash keep coming in regardless of market conditions that stall traditional outright purchases. This is very smart.
This is not a fad. It is the future and we are going to lead our industry in making this pivot very successful. Take 5 minutes and watch this video. Tien Tzuo is the CEO of Zuora and is a very key thought leader in the subscription selling movement. Pay attention to how much emphasis he places on the customer experience and how customers do not see value in the form of a product, but rather buyer decisions come from making it easier to run their businesses and improving their quality of life. We all have a hand in that and are the worlds best at it. 😊 j
-By Joe Jackson, VP of Sales & Marketing, Grand Prairie