Tag Archives: subscription

Go-to-Market (GTM) Strategies – Customer Onboarding

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#customeronboarding #gtm 

In this blog post, we will discuss the importance of customer onboarding.

We will especially talk about how it can negatively impact customer experience to the extent of losing a customer.

A recent story comes to mind when I was filling a Free Application for Federal Student Aid (FAFSA) form for my daughter’s recent college acceptance. The government form was so complex and I ran into issues at every stage including creating user id, setting up 2 factor authentication, getting Internal Revenue Service (IRS) returns and everything else. The process also involves waiting 2-3 days for them to confirm my details with IRS. It has been 5 days and I am yet to receive the confirmation that my account has been approved for next steps by FAFSA at the time of this blog post.

The above process certainly frustrated me. I felt like running away, if there were any other options available. Sadly, there are not any options for FAFSA.

But in reality consumers have many options for everything in their daily life. Does a company really want to lose customers because of their onboarding process ? 

Losing customers at onboarding is like customers walking away before entering your store. You lose a lot more as you don’t get to learn about them – their behaviors, their habits, their buying power, their preferences.

There are many reasons why customer onboarding may not be the best. This includes things like:

  1. Complex processes – when several backend organization involved, onboarding often gets slower
  2. Lengthy wait time – delays in account activation can prevent access to underlying services
  3. Lack of training – Not having proper training or documentation can create confusion
  4. Inadequate support – Customers can feel neglected due to this during onboarding
  5. Regulatory – Asking for Physically identifiable information (PII) can deter customers

These are just a few reasons, why onboarding becomes slower and painful.

Here are some characteristics of a great onboarding process:

  1. User centric – A great onboarding process is highly user centric teaching them what they need to know to get started
  2. Action-oriented – The best onboarding processes focus on minimizing the actions to enable users to complete onboarding tasks quickly
  3. Informed – A great experience during onboarding should focus on providing immediate value of the underlying product/service at the earliest
  4. Constantly evolving – It is critical to monitor and keep tweaking the onboarding processes to continuously enhance it
  5. Holistic – A great onboarding process does not just get the clients onboarded but also prepares them for experiences beyond

Think of a measuring customer onboarding time and track it for improvement. It can be used as a competitive differentiation. Do a before/after video and use it for marketing. Use analytics to go deeper where customers spend more time than needed. Identify and fix those gaps.


Lastly, go through the onboarding process yourself on behalf of the customer. If you are not happy, your customer will not be happy either. Tweak the process until you are fully satisfied.

See an example of how one company simulates this process for their sellers here : https://help.gumroad.com/article/62-testing-a-purchase . Here is the reason why they created that feature – “to see what your customers will experience when they buy from you. This is great for understanding your customers’ experience and will help you hone in on areas that perhaps need a little tweaking.”

Businesses are moving in the direction to provide better customer onboarding experience. It is high time, we do that with our products/services as well, or else we will be left behind.

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The magic of subscription pricing

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Image result for price is too high

A few months ago, one of our proposals got rejected because of our pricing. It was on the higher side for this client that was based in Asia. We had proposed a lump-sum payment (aka as perpetual pricing in the Product Management lingo!) for our product license.

The client did not have much room in it’s budget in this year and the next. Our proposal definitely offered a good ROI (Return on Investment) for the customer. But because of their limited budget, the client found our pricing very high.

Upon further probing we found out that the client was keen to consider this as OpEx (Operating Expense). As you may know, the operating expense is the monthly/annual expense that consists of items like salaries, internet and other routine expenses. On the other hand, CapEx or capital expenditure carries a big price tag upfront and with one-time payment. The CapEx typically include assets like computers, furniture, real-estate etc.

Now after our proposal was rejected, we started working on revising it to take it back to the customer. The silver lining here was that client had liked our product. We just needed to work within the client’s budget. Besides this, we also knew that the client was open to Opex pricing.

Here is what we did. Have a look at the following chart. The overall price is around $1.2 million dollars. In the first proposal, the entire amount is being charged upfront and the customer gets to use the product for its lifetime. In the second chart, we split the entire amount into multi-year payments so that the customer starts with a much smaller investment. This is the subscription or the pay-as-you-go pricing as the customer is paying as they go on using our product.

Year 2017 2018 2019 2020
Software License Price (Total) $1,240,000 $0 $0 $0

Table 1 : Perpetual or One-time Pricing

Year 2017 2018 2019 2020
Software License Price (Total) $310,000 $310,000 $310,000 $310,000

Table 2 : Subscription or Pay-as-you-go Pricing

 

In Table 2 above,  as it starts with much lower pricing, it is much more affordable. This offers a much lower point of entry aligned with the client’s budget. This subscription pricing will open up opportunities with customers who have tight budgets, in markets where lower price is key for winning.
Subscription pricing has always been a norm with B2C products. Think about your cable TV, your phone, or the Internet or the video service subscription fees. But with B2B, it is getting more popular now.
There are certain things that one needs to think through before offering a subscription pricing :
  • Revenue Recognition: The revenue recognition from subscription pricing happens periodically. So if the deal is for two years, then only 1/24th portion of the overall revenue gets recognized every month. This is the hardest part of offering a subscription pricing on your product. You and your management need to be comfortable with recognizing only a part of the entire revenue throughout the subscription period.
  • SKUs/Part numbers for subscription: Your ordering tools need to reflect the subscription pricing. The older SKUs/Part numbers will not work with the new subscription pricing. Subscription pricing should reflect the product ID and the period of the subscription. For example, if Apple is offering a two year subscription on its iCloud, the SKU should be along the lines of “iCloud – 2YR”. Without this clear demarcation, a lot of confusion can happen when other teams like operations and finance (that are working closely with you) are pulled into the approval/sales process. Also at larger companies, getting these support teams (Finance/Operations) to release the subscription SKUs is a big challenge for a Product Manager, if the organization has been only offering perpetual SKUs till now.
  • Technical Support: One of the smartest ways to limit the usage of your product beyond the subscription, is to offer product support for the duration of the subscription. For this reason, the subscription SKUs come in handy as they help the support team to quickly validate whether the support should still be offered. Once the subscription period is over, then you can cut back on the product support so that customers will not be able to get technical support, upgrades or updates on their product.

So as you can see apart from the lower entry point, subscription pricing also offers other benefits. But as a product manager you need to understand that it brings its own complexities and processes that you need to be aware of.