The rise of B2B subscriptions: What international marketers need to know
Subscriptions have been ubiquitous in B2C for many years – in entertainment, software, beauty, coffee, and even pet food – but increasingly they are big business for B2B too. B2B companies are finding that subscription commerce is the key to longer lasting customer relationships – allowing them to evolve from simply selling components, products, or parts to integrating themselves into the entire product lifecycle. That’s why subscriptions for B2B software and services are set to reach $344 million by 2024, with a 24% compound annual growth rate.
What is a B2B subscription?
B2B subscriptions work in a similar way to B2C. Companies sign up for a regular service which they pay a set price for on a monthly or possibly annual basis. Examples of B2B subscriptions include:
• Software: Also known as SaaS (‘software as a service’), where businesses pay a regular fee to use a particular piece of software. For example, a graphic design agency might subscribe to Adobe’s software suite to ensure employees have access to the tools they need.
• Sales: Businesses subscribe to a sales service such as an integrated point of sale platform or a payment function implemented on their website.
• Marketing: Businesses subscribe to marketing services which enable automation in areas such as social media posting or blog post scheduling. These services usually allow the customer to track where leads are coming from and identify possible areas of opportunity.
• Product delivery: Businesses sign up for a regular delivery service for certain products. By subscribing, they receive regular deliveries without having to worry about placing orders or sending payment.
• Publishing: As advertising revenue declines, subscription models allow B2B publishers to generate recurring revenue from their readers. Corporate subscriptions enable companies to buy bulk subscriptions to give their entire team access to relevant industry or trade-specific publications.
B2B subscriptions often have Basic, Pro and Enterprise offerings at different price points, to cater to different usage levels.
B2B subscriptions – challenges and advantages:
Advantages of B2B subscription commerce include:
• Stable and predictable revenue: Subscription revenue is stable and predictable, which means financials may be less erratic from year to year. This ‘sell once’ financial stability is a huge incentive for many.
• Better customer journeys: With loyal subscription customers, the quality of customer data increases – because if a customer uses your services regularly, you can learn much more about them. With more customer insights, customer journeys, marketing and service can become more personalised.
• More opportunity for cross-sells, upsells and retention – which significantly enhance customer lifetime value.
• Differentiate your brand: Not only do B2B subscription models offer convenience for customers, they can also help your business stand apart from competitors.
However, a B2B subscription model also presents challenges:
• Disruption to existing channels: Subscription commerce can disrupt existing channels, especially partners and resellers. This may require new ways to involve and reward them.
• Customer support: A subscription model means businesses may need to rethink how they handle customer support requests.
• Fulfilment: Completing orders and managing cashflow change under a subscription model. Businesses can expect smaller up-front payments and smaller, incremental revenues.
• Pricing and incentives: Moving to a subscription model represents a large shift for many B2B sales teams. Ensuring that pricing is optimised, and sales teams are appropriately incentivised, are key to achieving rapid buy-in.
B2B subscriptions are more complex than B2C
Despite the back-end complexity – with seamless transactions flowing through payment gateways – most B2C subscriptions are relatively simple. They involve one person giving one company their payment information, usually a credit card, and in return, receiving a product or service.
By contrast, B2B subscriptions have additional layers of complexity. For example:
• Many SaaS products are sold indirectly, through resellers, referral partners, or distributors.
• B2B procurement teams often require a range of payment options, from credit cards, to ACH payments, to traditional invoices.
• Entering a contract for a B2B subscription can require quoting, negotiating and approval from many departments.
• On the technical side, there may be significant integrations required to tie business software to different systems, not to mention migrations, user provisioning, and identity and access management (i.e. to prevent ‘piggybacking’ – which is when users allow friends and family to access the services they are signed up to, costing the service provider money).
Essentially, the key differences are:
• Market: B2C products typically have broad appeal whereas B2B products often require a narrow, niche focus.
• Path to purchase: Individual consumers pay to subscribe promptly. B2B subscription sales typically take longer as they involve multiple approvals.
• Buying motivation: B2C subscriptions can be driven by emotion or impulse, whereas businesses are looking for a return on investment, customer service and overall value.
• Complexity of offer: Individuals want simple, understandable offers. Business offers tend to be more complex, with different pricing structures to fit varying user scenarios.
What should international B2B marketers bear in mind?
As always with international marketing, the key is to tailor your approach to each target market, based on local preferences and behaviours. For example:
Understanding B2B customers in different markets:
How your customer values and uses your product is the primary consideration when designing and delivering a B2B subscription service. But how businesses understand, search for, purchase and use your product may vary across markets. For example:
• How do businesses conceptualise your product and search for it? Most B2B online searches start with variations on their business problem, not your product or brand name, and how that problem is understood and expressed will vary across languages and cultures.
• How important is security to them? For example, in Germany, safety and security is an especially important purchase driver, which means many brands need to dial up safety messaging and trust signals for the German market.
• Are your buying personas the same in each market, or do they vary? For example, different product features – such as optional upgrades, access to new features, ability to personalise and so on – may be more highly prized (or alternatively, considered less important) in different markets. Understanding your customer profile in each market is important to tailoring the offer for each market.
• We know from Hofstede’s theory of cultural dimensions that role hierarchies vary from market to market. In other words, it’s important to understand where the influence and decision-making power sits in your target market, so you can tailor your sales approach accordingly.
Businesses that prefer subscription pricing don’t want to pay for things they don’t need, so value is all about meeting the needs of customers. To design subscription packages that offer the right services at the right prices, companies need to understand what is valuable to customers as well as how they use the product or service in each target market.
Get to know your customers in each market so you can offer unique, personalised solutions. Market research with interviews or quantitative studies of customer groups plus analysis of historical usage and billing data can identify the needs of each customer segment. Access to Local In-Market Experts to help you navigate each market will also be invaluable.
Providing international customer support:
Customers will inevitably need support at some point when managing their B2B subscription. If there isn’t a process in place to offer support, this could cause retention and reputational issues.
Businesses can create a prioritisation system via service level agreements, to ensure that customers know what they are signing up for and what to expect. Businesses can also provide self-service support options, such as offering support pages and video tutorials, to reduce pressure on customer service teams. Corporate on-boarding – to ensure the experience is intuitive and simple for new users – is essential.
When operating across borders, international customer services issues to consider include:
• Availability of customer service agents in different languages
• Different time zones – for example, when providing live chat or contact centre support
• Ensuring that relevant materials – such as PDFs or video explainers – are properly localised into target languages
• Understanding customer service expectations and norms by market
Managing billing and invoicing:
When setting up a B2B subscription service, you need a payment management system which offers total security and follows best practices to keep customer details safe. It’s essential to choose the right system, with the appropriate level of security credentials in place.
Payment preferences vary by market, and there is no overarching global legal framework governing data privacy and security. For this reason, it is important to use Local In-Market Experts to help you understand the payment and regulatory landscape in your target markets.
. . .
Oban helps businesses expand internationally, using local in-market expertise to identify the biggest opportunities and avoid the costliest mistakes. To find out how, please get in touch.
Oban International is the digital marketing agency specialising in international expansion. Our LIME (Local In-Market Expert) Network provides up to date cultural input and insights from over 80 markets around the world, helping clients realise the best marketing opportunities and avoid the costliest mistakes.