8Aug2019
Move Over Conversion, Retention is the New King
by: Nordic Business Forum
Subscriptions. They are the future of business. According to Intercom co-founder Des Traynor, companies need to transition away from business models that only allow for one-time purchases to be able to stay competitive. But, he also warns that this will require a radical overhaul of what it means to market a product.
Every product imaginable can become a service when you start selling a subscription for it. We have already seen this concept explode online where you can virtually buy anything and have it delivered to you every month without question. Options include food, beauty, clothes, books, music, news, entertainment… it’s all available on-demand, at the touch of a button, all for one simple monthly fee. Des Traynor, the co-founder of the messaging platform Intercom, warns that we will all have to prepare for a world where just about anything can be boxed up and shipped to customers’ homes – and they will expect it. There may be serious repercussions if you don’t jump on this bandwagon.
But this isn’t a passing trend. According to the Economist, 80% of customers prefer subscription models. And, in 2015, Credit Suisse has calculated that $420 billion was spent on subscription goods in the US alone. From what Des estimates, that number could actually be closer to $1 trillion by now. So, what do we do with this information?
We, as business leaders, need to sit up and pay attention – especially if your business does not currently sell subscriptions. The entire economy is moving away from ownership and leaning into renting content. Unlike before, we’re moving towards a world of brand loyalty and predictable revenue where customers can try before you buy and make buying decisions relatively free from salespeople. And this is changing everything for technologists, entrepreneurs, marketers, and leaders because, based on Des’s arguments, it will take a lot of time, planning, and investment to shift to this new way of thinking about business and staying competitive in the future.
“If you don’t have a subscription model where customers can consume your product without having to pay a large upfront cost, you will struggle.”
– Des Traynor, NBFSweden 2019.
The key is to focus on retention, not conversion. Customer retention should be the core job of a marketer, says Des. He claims that we have exploited every last drip of the tried and true sales funnel and it’s time to change. Employ a model where people pay a low monthly fee. This lowers the barrier blocking them from trying your product, and it may hook them to keep paying each month. Soon, you’ll have your first 10, 100, 1000 annual users. The next challenge will be to keep them.
To learn more about how Des recommends creating customer retention in the new world of subscriptions, download our free Executive Summary from our Sweden and Norway events.
