We admit it — when we get email with the subject line “Simplicity is Charming,” it gets our attention. That’s how we came to speak with Tien Tzuo, CEO of Zuora. The Foster City, Calif., firm provides commerce and finance applications to companies operating in subscription economies, such as newspapers and utilities. Zuora’s software services include calculating the customer costs, billing and collecting on a continuing basis. “We’re the paywall, the technology that allows them to reverse their fortunes,” he says.
What is your company’s philosophy of simplicity and how does it relate to the “subscription economy”?
If you know a little bit about our mindset and what we evangelize, you come to understand why we believe the world is moving to a subscription economy. In fact, it’s almost moved to it. You, in either your personal or business life, are “buying” and owning less. There’s Dropbox for storage. Zipcar instead of buying a car. Netflix rather than buying movies. Spotify versus buying songs. It’s where the world is moving.
What that means is, the whole customer experience becomes really, really important. When you create a product, you get the customer to buy the product, and then you’re done. If it’s hard to use, if it requires remote controls, who cares? You made your money. But if you have a subscription and you’re trying to get the customer to use it and be loyal to it, that’s what this is about: Building valuable customer relationships rather than selling a widget. We’re flipping away from the product to the customer. If your goal is to build a service that customers can use, it has to be really, really simple. Otherwise, they’re going to be someone else’s customer, and you’ve lost that customer.
How does it affect your business model and sales, and how you do business?
If you look at the companies that operate in this way, like Zuora, we live these principles. We evangelize. What we talk about is, if the focus is on the customer, then your business model entirely changes. It used to be how many widgets I shipped and how much it cost to make each widget. There’s a lot less emphasis on that now. Zipcar doesn’t care how many cars they ship — they care about how many members they have. It’s the same with Netflix. How many customers did they lose? How many did they gain? What’s the net per customer? What’s their revenue per month? Those are the metrics they care about — not how many DVDs did they ship, because it doesn’t make sense.
It all starts with the customer. It’s simplicity for simplicity’s sake. In today’s world, a focus on the customer naturally simplifies the business model. You have to ask yourself three questions. First, who are my customers? How are they different from one another, and how much variation is there between them? What are my customer segments? For example, you’ve got your high-usage customer segment. For Amazon, those customers are served with Amazon Prime. For Comcast, they get the “gold package.” Then you’ve got your light users. For Dropbox, those are its “freemium” customers. They have basic, basic needs.
Now, how do I lay my customers out on the spectrum of high to low value? How do I come up with services that meet the needs of the different customer segments? And finally, what is a fair trade of value between my company and the customer? What should I charge each of these segments?
This simple framework is one I think every company should run themselves through in this new world we call the subscription economy.
What makes simplicity “charming”?
If you’ve ever seen someone having their initial experience with the iPhone or the iPad, or had it yourself, you know. It’s a lack of a sense of frustration. You use the product and it delivers value to you on an immediate basis.
Simplicity 2.0 is where we examine the intricate and transitory world of technology—through a Laserfiche lens. By keeping an eye on larger trends, we aim to make software that’s relevant to modern day workers, rather than build technology for technology’s sake.
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