After two days of learning and growth at Monetize 2015, it’s clear that responding to the New Normal is occupying the mind space of many. Much of the content addressed the implied question: how can we achieve sustainable growth and long-term success while taking advantage of this new normal?
Nowhere is this question more fundamental than when applied to recurring revenue models. At the end of the day, success begins and ends with the customer – is the customer satisfied, did you deliver for the customer, and will the customer turn from a one-time consumer to a long-term partner?
How Technology is Re-Inventing the Customer Relationship
JB Wood, President and CEO of Technology Services Industry Association (TSIA), delivered our afternoon keynote focused on technology’s effect on this evolving company-customer relationship. He’s in a position to know. Wood has been chronicling the relationship in the B2Btech industry during a state of rapid evolution for nearly a decade. Here’s a synopsis of this thoughts and conclusions:
Wood noted that the B2B business model was designed by early manufacturers that focused on three things: “make”, “sell”, “ship”. If your product was simple, like many early B2B businesses were, this “level one” business model worked. Companies sold basic offers, customers paid upfront, and sales focused on getting new deals and winning RFPs.
As technology evolved, products became so complex that enterprises had to include an additional capability – offering support “services” to the mix. This “level two” business model added service contracts to the “make”, “sell”, “ship” process. Wins were celebrated as were renewed deals.
For 50 years, these two models dominated the industry. Other models were dismissed as too complex, causing too much friction, costing too much, or taking up too much time. In other words, any other model was not scalable.
But recently, something changed… companies began to realize that their successes depended on the success of their customers. Rather than developing products and finding markets to use them, businesses began looking at customer needs and creating products and services to meet those needs.
If companies want to grow they have to do something they’ve never done before and step over that line to actively participate in making the customer successful. However, this had been a difficult task until recently. Companies were disconnected from their products and disconnected from their customers – they didn’t know what customers did with the product and didn’t care because the sale was completed.
Because of evolving technology, companies now can connect to every user and use data to see how customers use their products and services. Companies no longer just make, sell, and ship. Companies now connect to help customers operate, monitor to help them optimize, and actively play a role in driving better results for both sides of the buying equation.
Successful businesses today are now employing a “level three” and “level four” business model. The “level three” models optimize offers by celebrating recurring models and focusing on landing, adopting, expanding, and renewing customers for long-term growth. “Level four” models add automation to the “level three” structure. These models focuses on the customer outcome – customers pay for what they use and the outcomes they get. Businesses are absorbing the risk by becoming a utility and implementing the hardware, software, and service for their customers and allowing them to only pay for what they use. This can be risky if the customer decides not to use the product or service much. But the payoff is “glamorous” with a big payoff if the business learns to consistently drive adoption and expansion over time.
So how do companies learn to successfully process these smaller transactions? They must figure out how to mine their assets to monetize discreet customer events, which we call “revenue moments”. The first step requires taking another look at the product catalog. Are there services they used to give away that can be repackaged for profit? Or services that used to be wrapped into a big annual contract that can be broken into pieces and charged as the customer goes?
At the end of the day, monetization and recurring revenue success comes back to the New Normal – disrupting the status quo and forging new business models that focus on customer success. Today that requires brands to understand every single problem the customer encounters. This can be achieved when the systems you’re building and putting into place can provide important customer data and serve as a delivery mechanism for you to analyze that and deploy the services and resources to solve the problem.
Is your business ready to be part of the New Normal?