TL;DR
- Understand the importance of subscription lifecycle management to retain customers and maximize Customer Lifetime Value (CLV) without increasing capital.
- Learn the 6 key phases of the subscription lifecycle: Customer Acquisition, Activation, Billing, Retention, Business Expansion, and Business Success.
- Implement strategies like promos, personalized services, and data-driven approaches to optimize each phase and enhance the overall customer experience.
- Focus on pricing optimization, enhancing CLV, driving customer value, and predicting churn to maintain a competitive edge and reduce customer turnover.
- Use customer support and a knowledge base to prevent churn and improve interactions.
- Utilize data analytics and AI in predicting and preventing churn.
- Consider using specialized software like Togai for usage-based metering and billing to manage subscriptions efficiently and maximize recurring revenue.
With the emergence of subscription-based businesses and new competitors, it is essential to retain customers without increasing capital. But how?
Today, consumers prefer subscription-based services over purchasing a product for a higher price. Due to this trend, many businesses are adopting the subscription business model to maximize customer lifetime value. Consequently, companies are also finding ways to better understand the subscription business life cycle.
Subscription Lifecycle Management: A Brief Introduction
The subscription business lifecycle is a helpful framework that guides subscription businesses on how to:
- Acquire new customers
- Implement subscription billing
- Retain existing customers
- Expand their operations
- Attain financial success
A subscription business that navigates all the stages of the lifecycle is most likely to survive and succeed in the competition and improve its CLV (Customer Lifetime Value).
What Are the Different Stages of a Subscription Lifecycle?
The phases of a subscription lifecycle are everything we commonly encounter as customers:
- We discover a product or service and display initial interest.
- We buy the offering.
- We enjoy using it and experiencing its benefits.
- We leave the product or service for a new or better-priced option.
- We rejoin the previous offering to become a long-term subscriber.
Each phase of the lifecycle connects with the customer. When implemented with complete understanding and managed effectively, the lifecycle ensures profitability and success.
So, how does each phase in the subscription lifecycle contribute to achieving desired results? Let’s find out.
6 Key Phases of the Subscription Lifecycle
Phase 1: Customer acquisition
This is the initial phase where the prime objective is to attract new customers by implementing proven acquisition strategies like:
- Promos and discounts
- Free trials and freemiums
- Pricing and personalization
- Customer segmentation
- Product testing and iteration
- Customer onboarding
- Entitlements
These strategies enable businesses to optimize real-time pricing while helping customers create new offers.
Phase 2: Customer Activation
This phase lays the groundwork for customer experience. It commences when a customer subscribes to the service and ensures a smooth onboarding process. The aim is to create awareness about the product’s usage and benefits to ensure they derive maximum value in a short time.
Your activation strategies must be effective in confirming the customers’ decision to subscribe to the service. It should also set the foundation for a long-term relationship. This can be achieved by demonstrating the value and benefits of the subscription from the beginning.
Phase 3: Product/service billing
Billing is not only about making a logistic record. It is more about recording customer acquisition, revenue, and retention. Billing is an exhaustive phase that covers:
- Product invoicing
- Payment processing
- Tax calculation
- Fraud detection
- Accounts receivables
- Revenue collection
- Revenue recognition
- Revenue reporting
Proper billing management delivers multiple benefits:
- Better churn retention
- Smooth customer experience with financial transactions
- Better opportunity to highlight product value and ensure the subscription benefits
Phase 4: Customer retention
Subscription companies rely heavily on customer retention to maximize their customer lifetime value. This phase's prime focus is retaining customer subscriptions and gaining loyalty over time. A lot of effort goes into customer retention. Businesses need to:
- Understand the ever-changing customer requirements
- Ensure ongoing support during every phase
- Ensure consistent value of their products and services
- Maintain a positive ongoing customer relationship
- Enhance overall customer experience to reduce churn
Phase 5: Business Expansion
This is truly one of the most exciting phases of the subscription lifecycle as you level up your business and expand your horizons. It involves bolder steps like launching new products, cross-selling, upselling, and expanding your geographic footprint.
The overall strategy is to increase the customer’s value to the business by:
- Offering additional value that aligns with your customer’s requirements.
- Understanding usage patterns and satisfaction levels.
- Implement timely upgrades and add-ons.
Phase 6: Business success
At this stage, it is crucial to focus on enhancing customer service, from engaging them in the very initial stages to offering consistent support and fostering long-term loyalty.
This phase also involves one-off activities such as:
- Implementation
- Integration
- Migration
These activities should be combined with optimization-oriented tasks like:
- Benchmarking
- Consultation
- Analytics
- Business Intelligence
These activities aim to improve your offerings and meet your customers’ needs.
To succeed in the different phases of the subscription lifecycle, you need to transform your approach to your customers. This means that you need to change the way you interact with them. This involves implementing targeted strategies throughout the customer journey, from acquisition to retention.
Also Read: Subscription Business Models: Pros, Cons, and Key Factors
4 Critical Strategies to Optimize Subscription Lifecycle Management
1. Optimize your pricing
Subscription-based businesses require a robust pricing strategy to unlock new opportunities. To optimize pricing to your advantage, you should analyze the competitor market and set rates that appeal to your customers.
This Market-Based Pricing (MBP) strategy aligns with current market trends. It helps businesses to keep their customers happy while attracting new ones. Companies can get the most value from their subscriptions by following the suitable MBP. This improves customer acquisition and reduces customer churn.
2. Enhance your CLV or Customer Lifecycle Value
When managing subscriptions, it's important to prioritize customer support to keep them from leaving. A knowledge base can help improve interactions with customers and prevent churn. The optimal strategies mentioned below can help you achieve this goal:
- Offering personalized services
- Providing interactive sessions to boost customer engagement
- Creating engaging customer experiences to drive product adoption
3. Drive customer value
To have a successful subscription lifecycle, it's important to use a personalized and data-driven approach. This means:
- Analyzing customer needs and preferences in detail
- Engaging customers through personalized journeys
- Evaluating customer interactions for feedback
- Fortifying customer relationship with effective strategies
4. Predict and prevent churn
To prevent customers from churning you must deploy the churn prediction model, which relies on data analytics and AI to predict and target customers them with your retention efforts like:
- Email marketing
- Discounts
- Promo campaigns
The trick is to reach out to the customers at the right time and keep them engaged. It is also important to target those customers who are most likely to continue subscribing.
Wrapping Up
Managing the subscription lifecycle is crucial for subscription-based businesses. It helps you optimize revenue potential and maximize recurring revenue.
Using a Usage-based Metering and Billing Software like Togai is the easiest and most beneficial way to manage pricing and handle your product subscriptions with ease. Adopt Togai today. Reach out to our team to schedule a free demo to understand Togai’s capabilities.
