Michael Mansard, Principal Director – Subscription Strategy at Zuora
In recent years, open banking has grown from a curiosity to a trend, and now to what many in the Financial Services (FS) industry consider an essential business strategy. Opening up the ability for third parties to take advantage of a bank’s Application Programming Interfaces (APIs, this phenomenon has encouraged innovation across the sector. By giving FS firms the chance to monetise a capability and resource directly, APIs make launching new services easier than ever. In theory, this means that banks can increase their growth opportunities, improve the customer experience and boost their operational efficiency.
However, when it comes to the API economy, many FS firms are currently missing a trick. They are failing to think creatively and see that APIs are much more than just a new digital channel. These businesses are focusing all their energy on indirectly monetising APIs through service enablement – hoping that revenue will be driven by the underlying product – instead of directly monetising the APIs themselves.
In our hyper-competitive landscape – where new fintechs and startups are emerging each day – failure to recognise the opportunities around APIs is costing FS firms. They need to start investigating new and differentiated monetisation scenarios which will enable them to make the most of APIs beyond the requirements and create new, sustainable revenue streams. This is where new business models, such as subscription services, come into play.
The power of subscriptions
At their heart, subscription models are all about listening to customer needs and then fulfilling them. They create and enable businesses to collect a substantial amount of usage data which can be utilised to find out information about users. This gives the businesses implementing them the power to engage with their customer base at an individual level and adjust their services to match demand, whether it is to do with pricing or delivering continuous value. Research has shown that companies that embrace these models have grown at 400% on average over the last eight and a half years, outpacing S&P 500 revenues by almost six times during the pandemic last year.
For FS firms, subscriptions could open up the world of API-driven decision making, enabling them to grow beyond their core and maximise revenue from new-digitally powered offerings. This is because the usage data gathered through subscription models will enable companies to identify specific customer pain points. The connectivity enabled by the API economy will then open up a new suite of services and schemes that will solve these pain points.
By using their entire ecosystem – made up of various business units as well as third-party services – a FS firm can become a one-stop-shop, incorporating banking, accounting and payroll services into one neat customer-friendly package. Take Starling Bank as an example. It has used a platform model to create one of the UK’s best marketplaces, offering consumers a wide portfolio of products and services. Insurance information, loyalty schemes and accounting solutions for businesses, as well as mortgage products can all be easily accessed through one customer journey.
BigTechs are also starting to use APIs to incorporate financial services within their core offering. According to Andreessen Horowitz, such an approach “can increase revenue per customer by two to five times.” For example, Shopify moved beyond “payments-only” and now embeds financial services solutions to capture more value. Its customer base can now use one platform to launch their online store, sell through multiple channels, and manage everything related to operating their business: products, inventory, payments, and shipping.
In order to truly capitalise on the API opportunity, FS organisations need to remember that today’s consumer is willing to pay for a service if they see it as valuable. In fact, research found that over half of consumers are open to paying a bank subscription fee for additional personalised services. It is something that other industries have already realised and adapted to. For example, many media outlets – such as the Financial Times and the New York Times – have already shifted from relying on advertising revenue to monetising readership. Meanwhile, servitisation – where companies move beyond their traditional product core to secure growth through customer solutions designed around products and systems – is a trend which has taken the manufacturing industry by storm, with around one third of manufacturing firms in the process of adopting this strategy..
Despite this, many FS firms today are still operating on a traditional freemium model. As the name suggests, this means that customers are not charged for additional services. The general idea is that these services are given away without charge as an investment, in the hope of generating additional revenue in the future. In the old landscape – when interest rates were high and fees were not as transparent – this made sense. However, today it is no longer fit for purpose.
Instead, in order to remain competitive and continue to make a profit, FS firms need to take a strategic look at their offering to determine what they can and cannot charge for. It is important to remember that no company should ever turn all free services into a paid for portfolio, however, when handled with care, free to fee transitions can considerably boost the top and bottom line. For example, household name Monzo had to relaunch its paid subscription tier, “Monzo Plus,” after stopping its initial product following a 5-month experiment. The second attempt seems as if it will be a lot more successful in driving more perceived value: it converted 50,000 subscribers in the first month, even though paying for such services is new for UK consumers.
The API revolution is officially here. Digitally-powered services, alongside the data they provide, are offering a new opportunity for FS firms to get ahead of the competition, grow beyond their core, access different revenue streams and tap into new customer segments. Those looking to ride the open banking wave and improve their offering should consider subscriptions an essential model on which to build their future.
What Every Small Business Should Do
The majority of the difficulties associated with establishing a business stem from failing to accomplish the small things correctly. The basics will lead you to the top, as any competent instructor has stated at some time.
If you’re thinking of starting a small business, make sure you follow these 10 small business rules:
1. You must keep track of your finances.
Lack of capital, is the leading cause of small business failure. You must undertake proper financial planning and fully comprehend the business levers that might affect your cash flow.
Do you purchase stock?
- What amount of cash should you have on hand?
- Do you have a system in place to collect money from clients?
- How long do you have to wait for them to pay you?
- Do you have any loans that you need to repay?
- Do you rely on suppliers whose prices fluctuate according to market conditions?
2. You must create a data-driven culture.
The better your business decisions are, the more data you can track and utilize to make them. Business often necessitates certain “intuition feel” judgments, but it’s preferable to provide your instincts with as much knowledge as possible.
Tracking your company’s key performance indicators (KPIs) and understanding why they rise or fall may help you make decisions that will help you develop and stay on track.
3. You must participate in Lean Planning.
Rather of creating a long-written document that you utilize once and then file away, it’s critical to create a strategic and financial plan and track it on a frequent basis.
Planning is a continuous tool that should be used to understand the assumptions you have about your business and whether or not those assumptions are valid, or whether you need to make changes and adapt your assumptions.
60 percent of small companies in America fail due to a lack of cash, not a lack of profits—by utilizing Lean Planning, you can rapidly determine if you have made any financial assumptions that will have a negative impact on your cash. Maybe you assumed you’d get paid every 30 days on the dot.
By engaging in ongoing planning and then tracking the actual results of your business against your plans, you can quickly determine if you are getting paid every 45 days, and if so, you can increase your credit line quickly and appropriately, keeping your business cash healthy—before you get into trouble.
4. You must have a strategy in place for attracting and keeping top employees.
We are continuously on the lookout for top talent in our industry, therefore we make it a point to follow talent in our region on a regular basis and design outstanding retention programs and rewards.
Take some time to consider your company’s culture and what you want it to be, and make sure that culture is factored into your recruiting selections. We utilize LinkedIn on a daily basis to follow and acquire talent.
5. Every day, you must listen online.
Even if you just operate from 9 a.m. to 5 p.m. Monday through Friday, your business is “always on.” Every company should set up internet alerts to monitor what their customers are saying about them, their rivals, and the market in general.
Google Alerts is a fantastic (and free) tool for “listening” to what’s going on online. Be the first to know when a consumer leaves a negative review or when someone praises your company online. Use these methods to remain ahead of the conversation and capitalize on it. You need to get a business phone number too.
6. You must engage in marketing that generates a return on investment.
Small companies frequently tell us that they have no idea what marketing is. What should they spend their money on? Is it effective? Is it better to promote on the radio or on the internet? Should they believe the Groupon or Comcast salesperson who tries to persuade them to distribute discounts to the general public or buy local TV ads? What is it that works?
What does not work?
Small company operators should begin in venues that are both free and simple to access. Begin by forming relationships with local companies and company owners. Find out what it is that they do that is effective. Find out how visitors find your website and where they come from by using Google Analytics and your website.
Customers should be questioned about how they learned about you. And if you do decide to promote, make sure you know how to track it. Make a unique offer and keep track of it. Only provide one type of service or product. Repeat your successful marketing efforts after learning what works and what doesn’t. If you won’t be able to measure the results, don’t invest the money.
8. You must communicate with your clients.
Every company should communicate with its clients as frequently as feasible. If you own a retail store, talk to your customers at least once a week (if not every day). Discover what they enjoy—and what they despise.
If you own an online business, send a brief survey to your consumers or ask a few survey questions after they check out. Make a call to them. People enjoy talking and being asked for their viewpoint. Negative feedback might be difficult to hear, but it’s important to hear it and understand how you can improve your business for your consumers.
9. You need to know your competitors.
Both your direct and indirect rivals must be known and understood. You should always be aware of your rivals’ activities, including what they are doing, how they promote, and how they price their products.
You may be the only one of your kind in your town or sector, but that doesn’t mean you don’t have indirect competition. In my town, a small do-it-yourself tie-dye store has no direct competition.
They do, however, provide activity-based events and compete with all of the other businesses who host birthday parties and group activities. They also compete with other tie-dye merchants at Saturday Fairs and Markets. Even if they don’t have direct competition, they need to know how to position themselves against all of their indirect competitors.
10. You must have a larger goal in mind: a mission.
People like to work for companies that are more than simply a money-making machine. That isn’t to say that you can’t set sales or profit targets; it only means that if your employees believe they are part of a larger purpose, they will work harder and be more loyal.
5 Ways That Businesses Can Get the Most Out of Their Digital Marketing
Everyone knows that the world of marketing has been changing for the last two or three decades. The days of traditional marketing through billboards, radio ads and television commercials are still around, but something new is taking the world by storm. Digital marketing is the way of the future and has proven to be more beneficial for businesses everywhere. It’s not that traditional, offline marketing is completely dead, but it is difficult for business owners to deny the power of digital marketing and what it can do for their businesses.
Because the world has changed so much, people have now moved online, so a business owner needs to learn how to market their products and services digitally. If they do not, there is a huge risk that they will not be around much longer. However, the problem is that most business owners do not understand digital marketing. To begin, most owners do not fully understand marketing altogether, and they go for hiring a marketing agency to do this for them. But now, when you add a digital aspect to this scenario, it makes it even more confusing to the owners. If a business owner starts with simply knowing what digital marketing can do for their business and how to get the most out of it, this is a great place to start.
- Utilize Email
If your business is not using email marketing yet, you should be. It is far from being dead, and many people are just beginning to tap into what it can actually do for their business. To make the most out of your digital marketing efforts, advertising your company through email is essential. It could very well be the foundation of your marketing online. Email is all about keeping the channel open to your customer who you might not have seen in a long time or being available to someone who is simply interested in what you have to offer. Send occasional, nurturing emails to your following and customers to keep the dream alive.
- Build a List
Next, you have to build a list. Many marketers and business owners will tell you that you must have a list in order to survive. Now, the list is nothing more than a collection of information from your customers that includes their names, numbers and email addresses. You need this valuable information so you can email them and get in touch with them when things are dry. To get the most out of digital marketing, you should always be gathering this information from them and storing it for future use. Gather this information by running online advertising to generate leads.
- Do More Videos
To be the absolute best at digital marketing, your business should be using more video. This is because research shows that consumers want to see videos above anything else online. They don’t want to see still images and text, but they want to see you rock it through the camera. The good news is that this isn’t hard to do with modern innovations. Use your smartphone to record simple videos of your business and use these clever videos as the creative part of your digital marketing to catch their eyes and stop them from scrolling. The other great thing is that you will feel more like a movie star for creating videos.
- Build a Following
Now, it’s also important to build your online following. These days, it’s all about how many people you have “following” you online. These people are your audience, which is one of your valuable assets online. Don’t think that these are just virtual people that offer you known value. They are actual people who follow your company because they might be interested in what you have. It’s important to always build your following online. Increase your page likes and your audience, and your products and services will practically sell themselves. YOu can run specific campaigns to increase your following.
- Learn How To Target
To get even more out of your digital marketing, learn how to target the right people. Remember, you are doing all of this online marketing in order to reach people in hopes that they will make a purchase with you. To do this, you have to put yourself in front of the right people, not just anyone. But be happy, because online marketing makes it easier to find your customers. Learn how to navigate with digital marketing to find your right audience, and this will also make you stronger as a whole in your company. You will know your customer’s pain points, what they need and what they’re saying.
If you put a bit more effort into your marketing effort by learning how to do it digitally, you can definitely increase your profit and get the most out of it. With the right strategies and a little education, you can make anything happen online.
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