(can opening) >> Hey, welcome back everybody. Jeff Frick here with theCUBE. We are live in downtown San Francisco at Zuora Subscribe 2017. 2,000 people talking about the subscription economy and subscription equals freedom, and coming right off the keynote, we're excited to have the founder and CEO, Tien Tzuo, founder of Zuora. >> Great to be here. >> Jeff: Well first of all, great job on the keynote. >> Oh, thanks. Thanks for having me on the show. >> Great energy. You know, we hear a lot of about subscription economy. Obviously, a lot of people have Amazon Prime, a lot of us subscribe at Costco. We've got streaming music services, like Spotify. But I don't think people think of companies like Caterpillar, or Fender Guitar, as companies that have a subscription-based relationship with their customer. So before we get into the specifics, I want to talk to you, how is the subscription relationship different than a regular, one-off transactional relationship in the way that you are connected to your customer? >> Right, well, we all know that the world has changed. And we're even evangelizing at this event. This is the sixth year we're having this event. There's over 7,000 people that actually come to these events around the world. That the world is moving to a subscription economy. Starting two years ago, people said, "You know what, we get it. "This is a subscription economy. "I can feel myself, I don't buy products anymore. "I simply tap into services that I use." And the great thing about these services is the provider of these services really care about you. They want you to come back and use their services. They're constantly updating it. And it really frees us all from the shackles of product ownership when we want to get from point A to point B today. We don't have to worry about cars. We pull out our phone, tap into our service, and we're able to get what we need when we want it. >> Yeah, you have that as a really big theme. Kind of shackles of ownership, shackles of obsolescence. This idea that if you have a subscription to a service, you don't have to worry about the oil change. You don't have to worry about whether it's last year's model. You've pulled up some funny pictures of CDs and the CD wasn't even in the CD case. >> The CD, and that wasn't that long ago that we had these CD cases. >> I have empty CD cases all over my garage. I'm guilty as charged. Let's dive into this specific example. So Caterpillar is a cool example. Already having autonomous vehicles driving these big mining. That's all right, but let's talk about the Fender example, 'cause I think that's a really interesting one. What is Fender doing in terms of a subscription relationship with their customers to change who they are and what they are as a business? >> Well, we talk to companies that are going through this transformation. What they bring it down to is the shift in mindset of selling a product to thinking about customers. And so when Fender did this, an amazing transformation happened, right? They sell a lot of guitars. And when they look at shipping products out, how do I sell more guitars? And they said, "Let's not look at it that way. "Let's look at our customers." And what they found is that over 40% of their customers, guitar purchases, are first-time customers. And then 90% of the customers quit after about three months because it's just too hard. It's just too hard. And so when they look at it that way, they say, "Gosh, we have a 10% retention rate "for our customers after 90 days. "Now, if we can just extend that, "extend that out," and, oh, by the way, the 10% of customers that stay, they stay for life. They buy additional guitars. They buy additional amps. They buy sheet music. They buy picks. And so that's how we have to think. We have to not think about selling more guitars. We have to think about how to hold on to our customers for life. If we could just go from 10% to 15% to 20%, we are going to find so much more revenue and we're going to double or triple the size of our company. >> So how do they execute that with your guys' software. >> So what they need to do is they need to establish a subscriber ID. So when you buy a Fender now, there's a whole set of digital technologies that they draw you into. There's a tuning app that you can use, 'cause it's hard to tune your guitar. There's applications that teach you how to play a guitar. There's applications that you can use to play like The Edge, or play like Flea, or play like your favorite guitarist so they draw you into the process that creates social community, social networks. And what we do is we help them turn a guitar purchase into a subscription service that the customers opt into for life. >> So interesting, right? 'Cause this is not a transaction; it's an experience. And it's an engagement. And what are the other things you said in the keynote that got my attention? That there's all these other transactions now. You can buy, you can upgrade, you can pause, you can turn off, you can turn on, you can change the level. So it's this much more dynamic, engaged process and relationship between person selling the service and, arguably, guitar enjoyment, not a Fender Guitar versus an actual piece of wood and some metal strings and everything else. >> Right, what we try to talk about is this whole world of subscriptions. Ultimately, when you're successful is when you deliver freedom to customers, right? Freedom to customers that didn't have it before, right? The story of Netflix is if you have, or let's say Spotify, so you have $20 to spend, you don't have to buy one song, one album, one CD. You can access the whole library of music ever created. And there's a freedom to that. Now, what that means for businesses to react to that is that puts a lot of constraints on businesses, right? Before, they just simply take orders, give me a guitar; give me a song; give me five units of this Widget. Now they have to react to what customers want. I want this; I want this now; I want it like this; I want to upgrade; I want to downgrade. And so this creates all these constraints on businesses and what we want to talk about today was in this new world, businesses need freedom too, right? Businesses need freedom to price, to experiment, to design customer experiences, to get the information they need and what's holding them back is their IT architectures are the past. These ERP systems, and so what we presented this morning was an alternative view. A post-CR view, P, ERP view, of a new set of systems that we provide that help companies be successful and grow in this new subscription economy. >> That's a linear. Basically, that was your theme, right? Not because it's linear. >> That's right. >> It's those transaction types. >> These linear systems passed, they don't work anymore. >> Well the other thing I think is really compelling that I think needs more attention is now, if I have to pay $20 a month to Spotify, which I do. We're on the family plan. I love the service. But they have to keep delivering new value, because for me to keep paying every month, it's a much deeper relationship because they got to keep keeping me on the hook. They got to keep innovating. They got to keep delivering new things and so that's what I think is really interesting about this is the relationship between the buyer and the seller when you have an ongoing touch point every single month versus that one-time transaction. >> Well the keyword there is relationships, right? In the old model, which I'll call an asset transfer model, let me convince you to buy my product. Now you own it. I've gotten your money and I'm going to go focus on the next customer. This new model really requires me to care about the relationship, to care about the value that I'm creating, to continue to add to it to make sure that there's not an alternative out there that's moving faster and delivering things that I'm not. That relationship becomes really, really important. And that's why this model is better and that's why when you use services like a Salesforce, like an Uber, a Spotify, a Netflix, an Amazon Prime, you get the feeling that the other person, the vendor on the other side, really cares about you because, of course, they do. >> All right, so I know you're super busy. You got a lot to do but before you leave, just give your impression, you've been at this for a while, how this has grown. Has it grown faster than you expected? Is it about the same line? As you've seen the subscription economy grow from your initial vision six, seven years ago, what's your, kind of, takeaway as you sit here amongst 2,000 people that are in, arguably, the center of this universe right now? >> Gosh, when you look at this subscribed event, when you look at the energy here, And then when you look at the companies here, I would say five, six, seven years ago, we had a lot of software as service companies here. Box, they're great customers. They continue to be customers. But did we think that we would have Ford, right? Showcasing their electric bikes here? Or Caterpillar showcasing their autonomous vehicles? And these are gigantic vehicles that are carrying 200 cars in what they talked about on stage. And the world's clearly being transformed. Did I think it was going to happen? You know, we always knew the subscription economy was going to be here. We always knew the size and scope. But once you hear the stories, right, you can really tell how much our world is going to change and how much it's going to become just, simply, a better place. >> All right Tien, well congratulations to you and thanks for taking a few minutes to stop by the table. >> Thanks a lot. Thanks for having me. >> All right, he's Tien, I'm Jeff. You're watching theCUBE from Zuora Subscribe. Thanks for watching. (can opening)