Speaking to BrandWagon’s Ankita Rai, Professor Rajkumar Venkatesan of Darden Business School talks about the importance of subscription models.
The shift to digital has an impact across sectors whether it is news media, retail, finance or telecom. Speaking to BrandWagon’s Ankita Rai, Professor Rajkumar Venkatesan of Darden Business School talks about the importance of subscription models and why businesses should focus on customer lifetime value, and integrated online and offline strategies to drive growth. Excerpts:
There is a shift from the pay-per-product model to a subscription-based model driven by businesses like Netflix and Apple. What tips do you have for marketers who want to leverage the subscription economy?
It is not just a consumer focus, but an emphasis on long-term value that makes these businesses successful. It is important to intervene timely and keep users engaged so that they use the platform. In a subscription model, the entry level is low as the monthly subscription value is not high. For example, Netflix doesn’t bother if the consumer’s password is shared with everyone in the family. What matters is that the user remains active for a long time.
When opting for a subscription model, look at the long-term value of the customer. If you only focus on customer acquisition by giving discounts, they also leave equally fast. Lifetime value is only one component of engagement. The rest are influencer value, referral value and knowledge value. Referral value is when consumers are willing to talk and refer other people to the brand. Influencer value is when customers act as influencers and their recommendations or reviews really matter. Knowledge value is when users have information about how to use your product and give feedback. For example, Starbucks has a system in place for customer feedback and uses it to improvise its services. This helps Starbucks attract high lifetime value customers.
Given the huge amounts of data, do tech-enabled companies have a greater advantage over their offline counterparts?
In an increasingly multichannel world, offline players are falling behind their digital peers. If you only have an offline presence, you are in trouble. If not now, certainly down the road. It is easy to integrate mobile in your strategy. Even if you are offline and you don’t have a budget for a big website, you can connect with your customer through WhatsApp and communicate actively with her. Offline players can also use loyalty programmes to create ‘income effect’ by giving timely offers and discounts.
How do companies identify which data point is critical?
What kind of data is useful is an important question. Many transactions are happening on digital and companies can connect each transaction to individual customers. Start small. You don’t need big investment to leverage data analytics. Even if you have a subscription plan or are using Paytm, you can connect individual transactions to customers. So you already have transactional data to start with.
You can measure a customer’s attachment to brands too. The best way to justify RoI is to show results from small experiments. For example, compare.com in the US didn’t have a big budget. It is a start-up within a big company. It needed insurance companies on the platform. To get insurance companies, it needed active customers. So it had to advertise. It devised experiments to understand what message works best with consumers and asked them to give a call back. Instead of spending heavily on analytics, it tested at each stage. You need an experimental mindset and not a big team or a huge investment in analytics to start with.Go back to the basics and understand what value you provide to the customer.
What are some of the common pitfalls in data-driven marketing?
Some common mistakes marketers do is trying to do everything at the same time and trying to be perfect. Two, some companies don’t use analytics, thinking they have been successful without it in the past. And they think they can survive without it. That’s not true. Three, analytics is very important in case of disruption, when you have new technologies coming in. In such a scenario, analytics helps to understand what strategic bets to take. Also, now you don’t need data scientists but data curators. Curators know why things happen, learn from the past and make things happen.
How can big data analytics help news publishers drive revenues?
It has to be part of an overall understanding of what value news publishers provide to readers. Unless they provide additional value on digital over print, the reasons for audiences to use digital are not compelling. And the willingness to pay is not there. In India, it is difficult to say if consumers will pay for digital subscription. In the West, The Economist, The Wall Street Journal and Financial Times always had a paywall.The jury, however, is still out. Among the general news category, only NYT has a paywall. The strategy is to have an integrated digital and offline offering.
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But then you have to see what value you add online, more than print — such as interactive features, visualisation and real-time discussion forums. While you can target ads better, the digital unit revenue is much lower than the print. So while it is good for brands as they can use data to target, for newspapers and magazines it remains a challenge as their captive audience is still on print. In digital, there is no capacity constraint and also, customer loyalty is low. So in programmatic advertising, pricing will remain low for a long while in digital. Running a newspaper is tough business. The challenge is how one survives in this world which is going to be digital-led without going bankrupt and learns to run the business at a lower price margin.