This Sunday we feature a book review of Subscribed. Author Tien Tzuo is widely recognized as one of the thought leaders in the SaaS, founding Zuora in 2007. He built the business into a public company with 1,000+ customers, 1,000+ employees, and $100MM+ in revenue. Before Zuora, Tien was one of the “original forces” at Salesforce, joining as employee number 11. In his 9 years at Salesforce he built the original billing system and held a variety of executive roles in technology, marketing, and strategy organizations, including building out the product management & marketing organization, serving as Chief Marketing Officer and most recently as Chief Strategy Officer (2005-2008). He’s also an incredible angel investor and we’ve had him on to our podcast before to talk about his “Three Rooms” concept.
We give the book a 4.5 out of 5.0. The book is quick read and well thought out from one of the godfathers of the subscription economy. In addition to their surveys of key emerging industries for subscription, Tien delves into the organizational impact of subscription pricing. We really liked that they didn’t just keep it to technology and software companies which helps the reader frame this concept. There was not much by way of challenges or handling adversity when thinking through this model. However, the book is a fresh read and very relevant having been written this year. Below were a few key takeaways from our book review of Subscribed.
1. Gold, Silver, and Bronze Pricing Doesn’t Always Work. Tien spends time talking about the pricing strategies that work and do not work in market. Most companies think about a Gold, Silver, and Bronze strategy or some variant thereof. Tien worked with Simon-Kucher on this specifically to figure out if this strategy works or it doesn’t. Not surprisingly and according to Simon-Kucher, if 70% of your customers are in the entry-level tier, your business will not survive the long term. The demarcation between pricing buckets is not successful in most cases and companies should think harder about the value exchange. In short what they find is that the bronze tier offers too much value and the goal should be to achieve 70% of customers in the Silver and Gold tiers.
2. Organizational Design Can Make Or Break Your Business. One of the most notable takeaways from our book review of Subscribed was that to effectively build a subscription business you need to completely reinvent your business from an organizational design standpoint. The biggest barrier to transformation is always going to be organization and culture but in a subscription business this is even more important. The jobs of Marketing, Product, Finance, and even IT need to be completely reimagined. You need a customer-centric organizational model versus a siloed organizational model.
3. Subscription Is Going To Be Everywhere. While somewhat obvious, Tien lays out that the world is moving more towards this subscription economy than we may think. He gives countless examples of companies and industries like retail, music, transportation, media, and software. Some of the more fascinating industries include manufacturing, where companies like Schneider Electric are leveraging the internet of things wave to invent new subscription offers. The subscription economy is everywhere and this was another key takeaway from our book review of Subscribed.
If you liked “Sunday B2B Book Review: Subscribed by Tien Tzuo” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog.
Below we have compiled a list of metrics that could be relevant for most B2B marketplaces and hope that it serves as a framework for tracking KPIs for success.