Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It

Service features billed by usage are usually the core value metric of a subscription service offering: the most valuable feature to use, and the most expensive to deliver. If a company charges for use of something that is not clearly providing value, there is the potential to enrage rather than engage!

POSITION Web & Social Media Public Relations Events ACQUIRE Sales Teams Reseller Channels Self-Service DEPLOY Implementation Customer Training Customer Adoption RUN Account Management Technical Support Customer Success EXPAND Increased Consumption (Upsells) Increased Capabilities (Cross-sells) Customer Evangelism PEOPLE Recruiting Onboarding &a

What’s PADRE? Well, it’s our way of visualizing our company as an integrated organization composed of eight subsystems, all tied to the customer. We start with Pipeline, which a consumer-focused subscription company might call positioning. The key goal of the pipeline subsystem is to build market awareness and translate that into demand.

Run. As a subscription company, you succeed or fail based on how well and how long your subscribers take advantage of your service. Anything you do that doesn’t feed into the customer success flywheel is detrimental to the growth and value of your business.

We call this the world of happy business: happy customers, with happy companies, reinforcing one another, iterating forever, with no beginning and no end.

At its heart, usage-based billing is a way of quantifying value. The goal is to let customers pay for the value they need. The best pricing strategy will let you put a number on the metric that customers value most, based on how they actually use your service. This is commonly called a “value metric.” Simply put, a value metric should do three thin

MAXIMIZE THE GROWTH OPPORTUNITIES OF YOUR ACQUISITIONS

Then we have the Acquire subsystem, which encompasses the so-called buyer’s journey. How does this potential subscriber make decisions? What are their criteria for success? What are their alternative solutions? What are their potential objections? Who do they have to check in with: their spouse, their family, their boss, their CFO, their team? How

Here’s the key takeaway—it is perfectly rational for subscription businesses to spend all their profits on growth, as long as their bucket doesn’t leak. Remember, as long as you are growing your ARR faster than your recurring expenses, you can step on the gas. As Ben Thompson of Stratechery notes, “You’re not so much selling a product as you are cr