According to Rama, the subscription model is only effective when a company can provide an ongoing connection between its customers. This relationship involves marketing communications, sales support, technical assistance and customer service. In the US alone, companies are losing $83 billion each year due to customer churn and abandoned purchases! For this reason, companies with subscription model strive to gain first party data and improve their products to keep their customers interested.
SkyHi spends a lot of time studying their customer data. This focus keeps their customer churn down and drives customer satisfaction up. Customer churn is calculated by the number of customers who leave your company during a given time period. In a more down-to-earth sense, churn rate shows how your business are doing with keeping customers by their side. For customer acquisition SkyHi focuses mainly on referrals and brand ambassadors (digital influencers) as their main strategy. To ensure that they meet the quality of the product needed, they continuously increase partnerships to establish themselves as a lifestyle brand with their customers.
Podcast Takeaways and Learnings
1. Simplification of Customer Service
The subscription model is meant to simplify services for the customer. At SkyHi, they aim at providing customers with both affordable prices and easy process of getting plane tickets. The customer has the option to enter all the vital information in the app, including their passport data and flight number. Once the customer sees an empty seat, they make a booking and get the ticket in minutes.
2. Role of Consumer Behavior
The subscription model has largely been influenced by consumer behavior. In fact, it wasn’t until a few years ago that this model could work in the airline industry. Right now, customers are booking their flight within 30 days, most of which are one-way flights. Some of these are for leisure or a mixture of business and leisure. This is a significant change from several year ago when the supporting network like “Easy Booking” and “Airbnb” were not there yet.
3. Customer Data Collection
The subscription model has the benefit of collecting customer data and using it to improve customer experience. SkyHi uses this model to understand its costs and get returning customers to ensure plane booking continues. The data collected helps in understanding customer decisions and why they choose one product over the other. This way, the model ensures both customer loyalty and the running of a sustainable business in terms of finances.
4. Meeting the Lifetime Value to the Customer
The data collected from the subscription model can be used to determine the lifetime value to the customer. SkyHi had their own hypothesis about their lifetime value to the customers. However, the data collected from the model provided more information about customer behavior. The information helped in identifying what was valuable to customers. For instance, if customers are taking a weekend vacation consistently, then that’s valuable to them. By consistently providing them with this value, customers remains in SkyHi’s monthly subscription plan.
5. Addressing Customer Needs and Demands
The subscription model needs to be tailored to the needs and demands of the customers. For SkyHi, they provide specific routes in their platform for North America and Europe. These routes contain major hubs because the majority of big cities located in these regions. With the large number of flights with predictable prices, SkyHi provides the best service for their customers based on the available data by matching the customer with the right flight.
6. Offering the Best Deal
Subscription models provide customers with the best deal. In Amazon Prime, customers get the best deals on items for paying a subscription fee. Similarly, SkyHi provides its customers with the best deal they can get on flights. This is quite different from conventional models used in companies like Booking.com, which cannot set a booking price that is below that of the airline. For example, if Delta has its prices at $100, booking.com cannot price it at $75. But the closed system used by SkyHi allows them to set the lowest possible prices.
7. Aligning the Product with Customer Needs
The major challenge of the subscription model is aligning the product with the needs of the everyday consumer. However, the data collected on consumer behavior greatly helps in building a product that customers want. Once this product has been achieved, customers will consistently come back. Continuing improvement of the product based on the changing needs of the customers is also necessary. While the initial focus of the company is customer acquisition, it gets to customer churn as more customer data becomes available.
Essential Tips to Subscription Companies
Conduct adequate financial analysis before investing
Collect enough customer data to make the right decisions
Build products that meet the needs of the customers
Consistently improve products to meet the changing customer needs
Build the right partnerships with companies and influencers to provide a lifestyle product to your customers