How to Convince Your Sales Team to Adopt a Subscription Model

by Scott Edinger - June 23, 2020

If there is a lesson in the current unpredictable economic environment, it’s the importance of recurring revenue streams for businesses of all kinds. Having a subscription product or service that customers will reload, renew, or reorder repeatedly can smooth intermittent cashflow and keep a business alive. The Subscription Impact Report: Covid-19 Edition indicates that nearly 90% of subscription businesses are flat or growing membership during this time.

Evolving a business from order or project-based income to a subscription-based revenue model requires more than just a pricing or product change, however. Robbie Kellman Baxter, author of the recent book, The Forever Transaction, explains: “A subscription is a pricing tactic. By itself, it’s not a strategy. To build a recurring-revenue business, an organization needs to change how the product is designed, move from customer support to customer success, and keep the customer’s long-term well-being in mind across every functional area. Most of all, the sales team needs to be invested not just in the initial transaction but the ongoing relationship with each customer.”

It’s clear to me as I watch organizations wrestle with this challenge that creating a successful XaaS (anything as a service) model won’t happen just by selling different things. It will require your organization to sell differently. Moving to this type of integrated, long-term oriented model is complex. One of the most overlooked challenges is cultural. And often one of the biggest sources of pushback comes from the people most responsible for revenue: sales. Here’s what frequently occurs and what you, as a leader, can do about it.

1. The sales organization lacks confidence in the new solutions.

If your sales team doesn’t believe the new solutions are superior to your existing products and services, or if they think the new offerings aren’t quite ready for prime time, they will be slow to embrace them. This can spell disaster for new offerings. During my first year in sales, my company invested millions of dollars in a new suite of offerings. But the scuttlebutt among the sales team was that the new solutions were complex, difficult to implement, and a few new customers had complained that they weren’t fantastic. The message I took from this was clear: make your quota by selling tried and true solutions that work well for customers and don’t risk the time-sucking black hole of trying to make the new offerings work.

To get your sales team onboard with new recurring revenue models, leaders need to be curious and listen non-defensively. Invite dissenting opinions. If your salespeople aren’t selling the new XaaS products, try to understand why. Salespeople are among the most customer-minded groups in the business. If they believe they can sell something that customers value, they will do it. If they have doubts, they will try to sell something else. If they’re not selling your new stuff, there’s usually a legitimate reason based on reality in the field. Find out the cause of the skepticism and be willing to openly address it.

2. The sales organization doesn’t fully understand the go-to-market strategy for the new offerings.

Even if your sales team believes this is a good direction for the company, a new strategy may require sellers to develop new approaches and skills. This can be incredibly hard, and the difficulty is often underestimated by leaders. I worked with an organization last year that was moving from selling a range of technology products to selling a full suite of IT management services. This required a fundamental shift in the go-to-market strategy for the sales team. That included changing the level of customer contact from a purchasing manager to the Chief Technology Officer, engaging in sales conversations about data center issues instead of profiling the details of specific hardware, and having a deep understanding of long-term business outcomes, not just a stated technology need. When salespeople don’t understand how to make this transition or can’t execute on the new strategy, only a fraction of the expected revenue will be realized.

Communicate with your sales organization about their changing role in the execution of your strategy. Provide ongoing development experiences supported by management in the field. Review your current metrics for measuring success and create new measures of progress for your subscription offering. When it comes to incentives, you’ll need to rethink commission for both signing and for retaining business. You might utilize a few key salespeople who have already gravitated to the new model and caught the vision to help lead their peers through this transformation.

3. The sales organization is concerned that your strategy shift is the wrong direction for the company.

It’s understandable that salespeople used to selling a particular product might have concerns when the company decides to pivot and solve a range of different issues or move from selling hardware to providing services. Salespeople may be fearful about the future of the company.

To put your strategy shift into context, help your sales organization understand that you’re sacrificing short-term revenue for long-term growth in the same way that Satya Nadella did during Microsoft’s digital transformation efforts. When Microsoft moved from primarily providing hardware to a subscription cloud-based model, there was an initial period of low revenues and high investment costs. Author Geoffery Moore references the financial concept of the J-Curve to illustrate how investing heavily in a new strategy can take time to yield results. As a company sinks money into developing a new business model, there is a sharp drop profits, which eventually becomes a steep upward trajectory as the new offering successfully comes online. One of the main obstacles in transformation efforts is not being able to, as Moore writes, “stomach the J-Curve.” A big risk is bailing out too soon on a strategy that takes time to implement and losing out on both the investment and any substantive future return.

As a leader, you need to convey both your commitment to this new direction as well as your willingness to ride out the J-Curve. Show sales that they’re not alone, and that businesses in nearly every industry are moving in the same direction. Microsoft’s Office team instituted a “Subscription 101” development program to help their team members understand how subscription models work, why they’re so popular, and what it means for each functional area in the organization. When salespeople understand that the changes you’re making are both inevitable and highly profitable in the long-term, they’ll get on board to ride the J-Curve with you.

Building a relationship with an enterprise customer requires engagement across nearly every functional area. It can’t be accomplished by a single “Lone Ranger” sales rep, no matter how good they are. The entire organization needs to be optimized around building a long-term relationship with the customer. The most successful sales teams today include SMEs and technical specialists, project managers, and others, to design and deliver a compelling sales experience. Getting your sales team on board early in the process is critical to the success of any recurring revenue transformation.

Scott Edinger is the founder of Edinger Consulting Group. He is a coauthor of the HBR article Making Yourself Indispensable. His latest book is The Hidden Leader: Discover and Develop Greatness Within Your Company. Connect with Scott at Twitter.com/ScottKEdinger.