Over the last few years, hardware vendors have been pivoting their revenue strategies from a perpetual model to subscription. The subscription model is undeniably here to stay. Vendors often struggle to make this change effectively, however, and understandably so. The move requires a significant mindset shift — from a one-time sale to a long-term promise that the product and customer experience will continually improve and deliver increasing value.
To pivot effectively, every part of the organization (e.g., the C-suite, finance, marketing, sales, customer success, and, of course, product) must be on board — not just through the point of sale but beyond. Once the subscription paperwork is signed, winning organizations focus on delivering continuous value through the entire product experience to ensure that customer problems are solved, that satisfaction is solid, and, ultimately, that retention is strong.
Product management plays a central role here. The product manager must lead the effort to iterate and adapt the product to address customers’ evolving needs and how these differ among target market segments.
Here are five key changes that require product management’s focus when moving to a subscription-based sales model:
- Secure the resources to deliver on the subscription promise. Good subscription offerings deliver on a “forever promise” of what a customer can expect over the long term of the relationship. To deliver on this, the product team must understand how the customer is using the product and how it is responding through user data. By collecting performance, capacity, and fault metrics, product teams can holistically manage hardware deployments to deliver on the promise. Product teams must standardize on the most important product metrics — including both leading and lagging metrics — instrument the offering to make it a reality, and ensure that actionable product dashboards are readily available. When moving to this model, make sure to implement high standards of security and industry certifications for data storage.
- Plan for customer-first continuous offering updates/upgrades. While subscription customers do expect the offering to improve, not all customers can absorb continuous updates. Keep pace with changing needs, ensure that the offering evolves to address the most critical needs, and create customer-first release timelines. Make certain that updates and upgrades (each hardware component may have its own nuances) comply with the customer’s service-level-agreement commitment on availability. Ask customers about the impact of different software release types on their operations, and create a release plan that works for them. Internal resources such as product marketing, customer success, and customer support play key roles in offering release, and product management must work with these teams to gain alignment on “release readiness” and an optimized release plan.
- Invest in ongoing customer engagement. Keep an open, continuous dialogue with customers to learn about new needs as well as get feedback on the offering and potential enhancements. Leverage both quantitative data from surveys and product metrics as well as qualitative input from ongoing customer interviews and customer communities. Gather input from customer success and support functions (including customer support tickets) to gain a comprehensive view of feedback and leverage learnings to make informed decisions about short- and long-term product roadmaps.
- Continuously assess pricing and packaging. Customers like that subscription models offer the promise of continued improvement at one price for a set of services. Create a range of subscription offerings that fit the various use cases and price them for value — while balancing costs. Continually assess offering use, customer sentiment, and market changes, then evolve pricing and packaging to meet customer and business needs. Work to balance simplicity while identifying areas to monetize customers who have more complex needs.
- Partner with ecosystem technology vendors. Tech leaders may buy multiple, seemingly independent, and discrete units of technology that they eventually combine. For the subscription model to be successful, assess the ecosystem in relation to customers’ needs. Get customers to value faster and increase their satisfaction by providing preassembled packages and seamless integrations.
Product leaders should focus on these imperatives to ensure that their subscription product thrives in an era when customers increasingly expect rapid, continuous improvements. Clients can read our report on selling hardware-as-a-service subscription offerings here.
(This blog post was written in collaboration with Eleanor Theriault, research associate.)
