Transforming a sales organization to a subscription model without planning for wide variations in customer readiness can put existing revenue at great risk, according to Gartner, Inc. The subscription business model is becoming a fast-growing alternative to the traditional purchase model, and not just for technology companies, but sales leaders must prepare customers for possible challenges with this migration.
“It’s often not until sales leadership starts planning the details that the magnitude of the risk really sinks in,” said Steve Herz, senior director analyst in the Gartner Sales practice. “The big picture lens used to make bold strategic decisions won’t help the sales force get over the biggest hurdle, which is how to persuade customers to change as well.”
A necessary element for any successful transformation to subscription contracting is a sales operations transition plan that fully accounts for all levels of customer readiness. Gartner recommends sales operations leaders take the following steps to establish a customer readiness plan that will lead to a successful migration:
- Step 1: Define criteria for subscription readiness stages – For most companies, three categories of subscription readiness are sufficient to differentiate customer buying needs, but the approach itself must be designed around the unique details of the situation. For example, some companies may classify accounts according to the expected time horizon for migration (ready today/ready within 12 months/not ready within 12 months), while others may choose a particularly salient aspect of readiness for the categories (friendly industry/neutral industry/hostile industry). A two-level approach — ready or unready — may be preferable if the coverage model is already complex before embarking on this transition.
- Step 2: Automate provisional readiness assignments – Use the defined segmentation criteria to automate an initial, provisional assignment of a readiness group to each customer and prospect account. This automated pass will result in segment assignments that are broadly valid when applied to most accounts but incorrect in many specific situations. Correcting those misclassifications, however, cannot be automated; that step requires direct seller input.
- Steps 3: Fine-tune assignments using seller judgment – Sellers and frontline sales managers need to understand the approach and rationale behind the initial assignments, so they can review automated assignments to either validate or revise them. In addition to correcting readiness assignments, this step also creates an opportunity to increase the accuracy and completeness of customer data already in use. The readiness validation process can also be incorporated into the sales motion itself. For example, an existing lead-qualification process might be reframed as a “lead qualification and subscription readiness assessment.”
Gartner for Sales Leaders clients can learn more in the report "Don’t Try to Migrate to Subscription Selling Without Planning for Customer Readiness."