The Subscription Economy

Posted: October 20, 2010 in CRM, Economics, Technology
Tags: , , ,

I get a lot of email.  It’s not all because of my job or because I publish my work frequently.  Some of it is like that, but it seems like my email address is on a lot of lists and I am one of the people who get spammed whenever there’s a webinar to fill.  Perhaps you know this feeling.  Last week I was invited to a webinar for a sales product and it made me think about why we aren’t more successful and what might be done about it.

Jim Dickie and Barry Trailer at CSO Insights (www.csoinsights.com) have a big data set culled from major sales organizations over many years.  In their annual surveys they capture information about sales attainment and other things relevant to selling and managing sales people.

It should be no surprise that in a recession, companies have a hard time making their revenue numbers and the CSO data backs this up.  Companies lay off under performing sales people, give more responsibility to those who remain and watch expenses carefully.

I am not sure if this helps a lot but it’s what we do and you can’t argue effectively against such actions.  But in a world where we all know Einstein’s famous dictum that the definition of insanity is doing the same thing repeatedly and expecting different results the art of selling is over filled with techniques for doing exactly this.

For instance, two strategies to be taught in a sales webinar I was recently invited (by email) to include:

  • Discover key techniques to break through the gatekeeper and get straight to the decision-maker.
  • Discover key techniques that will get your prospect actively engaging with you instead of simply tolerating your pitch and ending the call with a vague promise of interest in the distant future.

Now, to be fair, selling is difficult under the best circumstances.  Experienced sales people know that getting appointments is hard because people don’t have time or budgets or who knows what and getting to a decision maker is always challenging but always necessary. There are times when a straight ahead strategy works better than others, times when getting the appointment is really the key to getting a deal.

Nonetheless, we might all do better today if we consider the situation we find ourselves in rather than selling in the conditions we wish we had.  We’re in an economic recession and budgets are locked down for many companies and spending on non-essentials is carefully scrutinized.  In this situation decision making retreats up the chain of command and getting to a decision maker is indeed tough.

At this point you might seriously think of alternative strategies.  Rather than using interpersonal tricks to get people to agree just to shut you up, you might consider selling to the pain.  Often we define a customer’s business pain as being without our product and while that’s true enough, it might not be the customer’s only pain.

In the current circumstances, the business pain can easily extend from not having a product and its capabilities to not being able to afford it or to pay for it.  In other words, if your product isn’t selling, the feature you might be missing may be payment terms.

I have written in this space before about creative financing in the form of the layaway plans that some retailers have fallen back on in an effort to keep sales momentum up in a down economy.  The thing that layaway or any similar approach provides is not discounting, which many vendors instinctively reach for whenever there’s a price objection.  Layaway provides a means for the buyer to maintain cash flow while paying for an item and I think this is exactly what we are missing in enterprise selling right now.

To the extent that a product we’re offering provides a way to improve output or reduce waste, there is a natural demand bias in favor of a purchase.  So we need to carefully examine if slow sales is a function of demand or if the demand itself is being artificially controlled by funding.  In that case, finding creative ways to finance a buy may make all the difference.

This is really a simple extension of the idea started by on-demand computing — companies pay by the month for computing services rather than in a lump sum.  The purchase isn’t financed in a classic way with on-demand, it is eliminated and the capital expense is turned into an operational expense.  It’s one thing to provide IT services this way and another to provide a durable good, but we should be able to find solutions.

Tien Tzuo, CEO of Zuora likes to talk about the subscription economy and I think he’s onto something.  And I think one of the key takeaways from this recession might be the importance of subscriptions — metered and elastic provision of all kinds of products regardless of whether those products exist in a central location or on a customer’s premises.

As in the case of the retailer offering layaway, we might find that an adjustment to help the customer’s cash flow situation could yield benefits all parties in a transaction.

 

So, what did you think?

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