- Omer Fogel
The Subscription Strategy Plan
Redifing busniess KPI's by understanding human behavoir
Every E-commerce company deals with the ongoing challenge of creating growth strategy and constantly analysing its product line. But what happens when an E-commerce company sells a device operated by an app? While selling a device can be measured by a purchase conversion, the app requires a long term user valuation, value proposition understanding and retention efforts.
The need was obvious - the company was looking to create more revenue streams from new customers and also make sure the retention rate is high with it's existing users.
So how do you turn a business from focusing on "black box" product sales into a successful subscription-based business with a strong user stickiness?
There are many common ways to create a subscription model, with different approaches as to what could lead to a higher conversion rate. Some will put the emphasis on pricing, while others focus on the structure pricing tiers which can be adjusted over time. But before diving into the model itself, the core mission of Raven was to understand the user incentive - why do people purchase this product? what counts as good user experience? and WHY do people stop using the product?
By reviewing the data and understanding the usage habits of the user, it was clear to see that in order to create the key economic principles that will lead to a successful subscription model. the product required a personalized value proposition with aligned communication messaging.
In order to offer a personalized value proposition for each user, Raven needed to create a new definition of a 'churn user' based on the user activity interval. For that purpose, Raven constructed a data warehouse methodology by connecting the data of both the app and the physical product and the E-commerce website. The process led to establishing a unique user object that better reflects the motivation to the purchase of the physical product and the day to day metrics of it's usage. Within the data warehouse, Raven crafted clusters of users, providing solid information to create a new value proposition.
The 're-define user' methodology was integrated into all company units, originating a new type of relationship with a large portion of the company's clients. 33% of the users who were considered 'churned users', re-installed the app, and converted to subscribers.
Other implications of the new user definition concluded in a major cost reduction - specifically in the company's data infrastructure (databases, cloud cost, multiple dashboards, and of course manpower).