In this third and final article of success factors for building a digital subscription business, we look at two additional areas to focus on. These areas are Data-driven workflow and Flexible organization.
The great thing about a digital subscription business is that everything can be measured. We usually split these metrics into two domains: hard and soft. Hard metrics are those that relate to the number of subscribers, how much they pay, how long they stay and what costs we have. Soft metrics relate to their activity, engagement, experience, preferences and even emotions.
For both domains, it is important to select a limited number of metrics and make sure that the entire organization understands them, and knows how to work to influence them in the right direction. Initially, it is recommended to keep it simple and consistent. A good start is a number of generic hard measures – such as the number of subscribers, total churn and sales numbers from different channels. The soft dimensions can be about engagement such as number of articles read, reading time and social media engagement.
The trick here is to understand how the soft parameters affect the hard ones. For example: How do we measure and drive engagement (soft) in such a way so that we know that the churn (hard) also decreases in correlation? Here, every organization needs to draw its own conclusions.
It is important to steer the organization into a data-driven mindset where all actions, projects and activities are based on actual data, or at least hypotheses about how the data will be affected. In this way, you can prioritize all activities you do based on what actual data or hypotheses say, and thus ensure that you work with the things that produce the most impact. Being hypothesis-driven is important in order to have an idea of how something you do not know will develop – and in this way be able to learn.
When it comes down to the actual metrics that should be used to measure the business, there is a plethora to choose from. We will return to this in future articles, but in short, one can say that all subscription businesses can be understood by four goals: increased sales, reduced churn, increased average revenue and reduced costs. These four measures have a strong correlation with each other. An even more comprehensive measure is lifetime value, which can be seen as the holy grail for (hard) analysis of subscription businesses. In short, this describes what total revenue (or contribution) we will receive from a subscription during its life expectancy. It is a very powerful measure if used properly.
Success factors for Data-driven workflow
- Set the most important metrics for the paid content business
- Make sure everyone in the organization understands and follows the metrics – in real time, all the time
- Focus on activities that actually affect the metrics in the right direction
Digital subscriptions and paid content are a moving target, where the market, products and consumer behavior develop at a rapid pace. Nobody knows what will work in 6 months. This means that the organization must follow and be as flexible and fast-moving as the market.
One of many examples of when a classic sales and marketing organization works poorly is when you divide the organization into sales and loyalty. One department should sell as much as possible and thus be guided by new sales figures. The second department has the goal to create loyal customers and thus is guided by increased retention (or reduced churn). This is a recipe for failure as it turns out that how new sales are made often made is the most important churn factor. If the new sales department tries to maximize its numbers (which they have incentives to do) then it always backfires on the expense of loyalty people.
One way to be more flexible is to break up previous silos and departments. Here, for example, you can look at models that are based on agile teams, where you gather a wide range of skills required to perform the task. These competencies include sales, marketing, conversion, analysis, product development and editorial. If you gather these skills in one place, and give them the right conditions and incentives, fantastic things can happen.
By just gathering these skills in one place, you have come a long way. All too often, these competences sit in silos under different people in a management group. This usually means that all cross-functional work must in some way flow through the management team in order to be approved and prioritized. Few things are as detrimental to an organization as a management team trying to manage in detail. Instead, find new ways to give employees the mandate to test and make decisions for themselves – based on clear frameworks and metrics.
Success factors for Flexible organization
- Engage the right mix of skills – such as analytics, product, editorial and business
- Work flexibly, agile and cross-functionally to promote growth – give employees the mandate
- Dare to test and learn from mistakes – monitor closely how others succeed in the market
That was the total of six areas that, in our experience, are most important to focus on optimizing first. However, they are far from the only areas that need to be considered. For example, we have not talked much about the digital product itself, or the content. These areas are obviously critical, but also something that many media houses have worked with for a long time.
As a concluding advice and perhaps the most important success factor, we must put forward the importance of building the right organization. It is pointless to run temporary projects to optimize the business. They become outdated in no time. Instead, one must embed continuous improvements at the core of the organization, to achieve long-term success.
Here are the other articles in this series: