Vasudeva Akula, VOZIQ AI cofounder and head of data science. Helps recurring revenue businesses improve customer retention using ML.

‍

GETTY

In the world of subscription businesses, staying ahead isn't just about offering a great product—it's about navigating a complex landscape of economic challenges, changing customer expectations and intense competition. Fortunately, artificial intelligence (AI) offers a game-changing approach to tackle these challenges head-on.

When used effectively, it can eliminate growth barriers, uncover new opportunities and help businesses adapt to rapidly evolving customer habits. But adopting AI isn’t without challenges. Let’s explore the benefits AI brings to subscription-based businesses and how to overcome the obstacles to adoption.

The Benefits of AI In Eliminating Growth Barriers

1. Retaining Customers

Customer retention is critical for subscription businesses, and AI is transforming how it’s achieved. Machine learning identifies at-risk customers by analyzing behaviors, payment trends and usage patterns, allowing businesses to act before churn occurs. Proactive strategies like personalized offers or timely outreach can restore trust and reduce cancellations. Retaining customers not only safeguards revenue but also offsets the high costs of acquiring new ones, driving sustainable growth and loyalty.

2. Optimizing Pricing Strategies

Dynamic pricing powered by AI gives subscription businesses an edge. By analyzing customer behavior and market trends, AI helps businesses offer discounts to cost-sensitive customers during downturns or recommend premium options for high-value users. This approach ensures competitive pricing without sacrificing profitability. Thoughtful implementation minimizes risks—like alienating price-sensitive customers—and balances revenue growth with customer satisfaction, keeping your pricing strategy both flexible and fair.

3. Maximizing Revenue Per User (ARPU)

AI unlocks revenue growth by enabling precision upselling and cross-selling. It analyzes customer preferences to suggest upgrades or complementary services that align with individual needs. Predictive insights into customer lifetime value (CLV) help segment audiences, prioritizing high-value customers for tailored strategies. This approach doesn’t just increase ARPU; it strengthens customer relationships by offering meaningful solutions, ensuring long-term loyalty and profitability in competitive markets.

4. Adapting To Evolving Customer Habits

AI empowers businesses to not just meet but exceed changing customer preferences and expectations. By leveraging real-time feedback, sentiment analysis, and usage patterns, AI uncovers valuable insights to refine products and services. Predictive analytics goes a step further, forecasting customer preferences and behaviors, enabling businesses to proactively tailor offerings, like adaptive subscription plans or timely, personalized recommendations. This not only enhances the customer experience but also solidifies a competitive advantage in subscription-driven markets.

5. Empowering Frontline Teams

Real-time access to customer profiles—including their subscription plans and preferences—enables agents to engage in meaningful conversations with customers and offer effective resolutions. AI also offers prescriptive guidance, such as tailored resolution options, to address concerns effectively. Additionally, it supports re-targeting efforts to win back customers and even drives referrals. Empowering teams with AI ensures every interaction strengthens customer relationships and maximizes lifetime value.

‍

Challenges In AI Adoption

Despite its benefits, adopting AI comes with challenges that businesses need to address proactively.

• Organizational And Cultural Resistance: Change is hard. Employees and stakeholders might resist AI adoption due to concerns about job security or skepticism about its effectiveness. Some may feel threatened by automation, fearing it could replace their roles, while others may doubt AI's ability to deliver promised outcomes. Overcoming this requires strong leadership and clear communication about the benefits of AI for both the business and its employees. Leaders must foster a culture of collaboration where AI is seen as a tool to enhance human capabilities, not replace them.

• Skill And Training Gaps: AI is only as effective as the people using it. Many businesses lack the in-house expertise needed to implement and manage AI systems. Upskilling employees to understand AI’s potential and interpret its insights is crucial for long-term success. Training programs should focus on making AI concepts accessible, teaching employees how to integrate AI into their workflows and make data-driven decisions confidently. Partnering with external experts or hiring AI specialists can also bridge these gaps in the short term.

• Process And Policy Adjustments: Integrating AI into existing workflows often requires updating legacy systems and redesigning processes. This can lead to short-term disruptions, such as temporary inefficiencies or confusion among teams. However, these changes are necessary for long-term efficiency and scalability. Businesses must approach this transition with a clear roadmap, ensuring that all stakeholders are aligned and aware of the steps involved. Regular updates and feedback loops can help mitigate disruptions and keep the implementation on track.

• Data Privacy And Compliance: AI relies heavily on data, making compliance with privacy regulations like GDPR and CCPA essential. Businesses must ensure that their AI systems are transparent, secure and respectful of customer privacy. This includes adopting robust data governance practices, anonymizing sensitive information, and maintaining clear documentation of how data is collected and used. Besides building trust with customers, this also minimizes the risk of legal or reputational damage.

Steps To Overcome Adoption Challenges

• Start Small: Begin with pilot projects to demonstrate quick wins and build organizational confidence in AI. For example, start by using AI to optimize marketing campaigns before scaling to other areas like pricing or retention.

• Invest In Training: Offer AI literacy programs for employees and foster a culture of collaboration between humans and AI. Make it clear that AI is an enabler, not a replacement.

• Choose The Right Tools: Select AI platforms that align with your business goals and work with vendors experienced in your industry’s unique challenges.

• Prioritize Data Quality: Ensure your data is clean, centralized and actionable. Invest in robust data governance practices to avoid integration issues and maintain compliance.

• Communicate The Value: Clearly articulate how AI will benefit customers and employees alike. Share success stories to gain buy-in and build trust.

AI has the power to eliminate growth barriers, especially for subscription-based businesses. From retaining customers to maximizing ARPU and adapting to evolving habits, AI delivers measurable value.

However, adopting AI requires careful planning and a commitment to overcoming challenges. With the right strategy—starting small, upskilling employees and prioritizing transparency—AI can become a game-changing ally in achieving sustainable growth.

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?

‍