Lessons from the author of Subscribed, Tien Tzuo
“In the future, you and I will not own anything at all in our entire life.” Tien Tzuo, CEO Zuora.
Could you ever see yourself subscribing to your refrigerator, just like you do to Netflix?
What about a tractor, or a floor?
Tien Tzuo, author of Subscribed, says this is our future, and the future of business. It just comes down to thinking of your product, any product, as a service.
The former Chief Marketing Officer and Chief Strategy Officer of Salesforce, Tzuo is now CEO of Zuora, which guides businesses while they move from selling products to selling subscriptions.
Here are some of the key insights from our interview with Tien Tzuo:
Why do you have tractors? You want to move dirt. So why buy the tractor? Why not pay per square metre for the dirt to be moved? The company will send out drones, design it, and get GPS enabled devices to do it. It’s about selling the outcome, rather than the product.
How would you sell a subscription to a floor? Put sensors in it, and sell access to the data. Smart floors are the ultimate connected device to detect what’s going on. (eg. pedestrian traffic information for schools and councils, and hospitals can tell if a patient has fallen).
A U.S. airline Surf Air is trying a subscription model. Really. It's All You Can Fly for $US1500 - $US2000 a month. The California-based commuter airline uses Pilatus PC-12 aircraft. It tried unsuccessfully to expand into Europe, and is focusing back on the U.S.
Internet of Things is coming into physical products. Sensors in office desks, office chairs, tell you how often they’re used. Once every item is a smart device the possibilities explode.
We already subscribe to so much. We subscribe to Netflix and Spotify, we don’t buy movies or music any more. People don’t think about Uber as a subscription service, but it’s like a subscription.
How to get started: Don’t try to force yourself into a recurring model for day one. Just start with your customers. Use technology, get them to sign up for an ID, start tracking them (check their privacy wishes, have them opt in to use a service), and then see what are they actually doing.
Really see the customer for what they’re trying to do. For example, Canon can, if you wish, track how you use one of their cameras. Does this customer take 30 photos or 50 photos? Eventually some picture will form, and if you do just a little bit more for them, the business can go to a completely different place.
You are no longer selling a product, you are building a customer relationship. Engage with them, then have a business model that’s tied to how much they’re using the service, and the more they use, the more your business grows.
Apple don’t worry about how many phones they sell. They have over a billion Apple IDs, their model is ways of monetising the Apple IDs.
It’s a better business model. Competitors can reverse engineer a product and bring a clone to market quickly, especially when outsourcing manufacturing. But, when your competitive advantage is the knowledge of your customers (for examples, Netflix knows what their customers watch, Tesla knows HOW their drivers drive); that information is hard to replicate, and is a much more sustainable competitive advantage.
Subscription pricing is not something you set and forget. Look at your business goals for the following year, and reflect that back into your packaging and pricing strategy. Price to achieve different objectives (such as customer acquisition).
Have cheaper versions of the service to get people in the door. If you look at Surf Air’s plan there are different packages for individual travellers, and for groups/families.
You are always in the BETA mindset. With the new services, you launch a service and you can see what your customers are doing. You should always be iterating your product, always be getting better and better. Your initial set of customers really sets the course to where you want to go, so choose to target customers who best represent where you want to go.
PADRE acronym – to develop a dynamic customer mindset. Pipeline/Positioning (awareness), Acquisition (find the customer), Deploy (get your customers successfully using your product quickly), Run (how well, and how long, they use service), Expand (you want retention, growth and advocacy. Offer other features).
Just selling a product is not good enough. It’s got to deliver outcomes, it’s got to be customised to customers’ needs, it’s got to be smart. More and more of the economy is going to be driven by the service economy rather than product sales. It changes everything. It’s no longer about selling units, it’s about building deep customer relationships and wrapping your business model around it.
Tien's GREAT EIGHT (eight questions we ask all out authors, to get to know them better):
Book recommendation: A science fiction trilogy: The Three-Body Problem by Liu Cixin, takes place over the next 800 years. Pretty mind-blowing book.
If you could co-author a book with anyone, who would it be, and what is the book title? I’d like to try my hand at fiction. We modelled our book* on Malcolm Gladwell, so it would be great to write a book with him on whatever subject he’d like.
What's a great bit of advice you could share? It’s been a 10-11 year journey to build this company, and so have a vision of where you want to go, and have the grit to go ahead and work though how to make that into reality one step at a time, and one day you’ll wake up 3, 5,10 years from now pretty amazed at what you’ve achieved.
What's been your lowest moment, and how did you recover? It’s always going to be where we disappointed a customer. Obviously, we don’t set out to do so. We had a vision, and the customer bought into that vision, and then as we’re executing that, either from the product side or the sales side, we fell short. The best thing to do is to take those learning experiences and solve the problem, and the customer is going to see the character of the company, and they will often become long term supporters of the company.
How do you relax? Building these companies, you’re so immersed and so committed, so you have got to pull away. Kids, I have a 9-year-old daughter and she will pull me away, she’ll force me to disengage. Pop culture, Netflix, HBO, reading a book.
What’s a fun fact that’s not widely known about you? People are surprised that I grew up in Brooklyn, part of an immigrant family, I din’t know anything about technology. I was riding my bike on the streets of Brooklyn. The journey all the way to Silicon Valley, and ultimately building a company that was able to go public last year was a great journey.
What's the secret of success? Vision and grit.
What's a prediction for 2025? In 2025, I think it’s going to be pretty amazing world. We (at Zuora) believe that you and I will not own anything at all in our entire life. It’s all managed by subscription services.
*Subscribed is by Tien Tzuo with Gabe Weisert
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