Monthly Archives: November 2013

Could You Sell Everything with Subscription Business Model?

There has been a surge of subscription-based businesses lately. I am not only talking about subscription entertainment services like Netflix, Hulu or Spotify. There has been also surge in subscription models both in mundane physical (Dollar Shave Club) and in high-interest software (Adobe Creative Cloud).

Naturally the model is not new, newspaper subscriptions have been around for almost 300 years. You could also view library institution as some kind of a precursor to Spotify and other entertainment subscription services. You “subscribe” by paying taxes (in Finland), or by paying nominal fee (in Singapore).  Digital has enabled more smoother service and also more innovative business models (Birchbox). In catalog-era Birchbox model would not have been feasible, but thanks to Internet you can convert people more easily from receiving the samples to buying the actual products online.

The upside for the companies with subscription model is two-folded, firstly lifetime-customer-value will likely be higher and the business becomes more predictable. For consumer the main benefit is of course the convenience. You are getting new socks every month, they are invoiced automatically and you do not run out of socks.

“All the evidence suggests that consumers love subscription content models — it’s the original model of magazines and newspapers and cable, and now it’s the power behind Netflix.”
James McQuavey (Forrester)

Subscription model is not right approach for every company, but might be something to consider. Whether you are working in product or service, it might be interesting addition to your portfolio or differentiator against competitors. Some considerations I have noticed based on subscription based models:

1. It has to be habitual usage for products
Tie-a-month works for snappy-dressed businessman but is not necessarily appealing to a person, who puts on the tie only to weddings and funerals. Usually the cycle is monthly, but could subscription model work with longer breaks? Your computer would be updated yearly? Your car would be updated every second year? Maybe not.
Interesting examples:
Miru (Monthly subscription to contact lenses)
French Cellar (Monthly subscription to French wines in Singapore)
The main challenge with product subscriptions is that you end up with lots of stuff. For many people that is not necessarily a problem, but as people. That is why I think there is definitely some kind of opportunity with combined subscription & swapping/recycling service (Such as Swapstyle or Boxcycle). It is definitely route to explore.

2. Subscribed Service is about access you value
Actually with Spotify you are not really paying for ability to listen to the music you are paying for the access to the music. You might not listen to music that much, but you want to pay for the access to that Barry White song on just the right moment. This is especially easy to see with Priority Pass. The knowledge that you could go to lounge in Airport makes already your travelling more enjoyable, whether you entertain that access or not.
Interesting examples (besides the abovementioned):
Ordergroove: They actually create subscription model platforms for their clients. I am not sure if they have some kind of subscription based compensation system build in their billings, but it would make sense.
One opportunity comes to mind with services. I like to go to different culture events, but the information for those comes many times too sporadically. You might notice interesting exhibition when it is already over. You have to search for the info from different sources, which takes time. What if you could have subscription-based culture package? You would select your level of commitment: from light once-a-month to heavy-user once-a-week. Then you would get access to an event on a fixed date. The model could also have range from just recommendation to total turnkey solution with tickets and transportation. That would be also at least worth an exploration.

Could you change your business to subscription model?

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Five Success Lessons from Nordic Noir

Whenever I have homesickness, I go to the nearest library and borrow some Nordic crime fiction. I read Stieg Larsson, Lars Kepler, Jussi Adler-Olsen, James Thompson, Arnaldur Indriðason, Jo Nesbo and whoever has Scandinavian sounding name. Then I read them in the sun and miss the cold and dark winter.

Because the phenomenon has been so close to me (geographically), I have been thinking lots about these writers and identified five key success factors:

1. Success feeds even more success
Typical Finnish way is to think that the success is a zero-sum game. If someone wins, other people will lose. That is not the case.  Success feeds success. After the phenomenal sales of “The Girl With The Dragon Tattoo”, the appetite for even more Scandinavian crime novels has been infinite. The halo effect has gone also beyond Scandinavia and it is now actually easy to find detective novels also from Finland and Iceland around the world. People think in clusters and now it is definitely advantage if you happen to come from cold northern country and write detective novels (with preferably semi-alcoholic main character). The appeal has also expanded to TV-series as well, with US-versions from The Killing and The Bridge. Movie adaption of “The Girl With Dragon Tattoo” was a success and I cannot wait the “Snowman”-movie whether it will be done or not by Martin Scorsese.

2. Success does not come out of nothing
All the Nordic countries have strong roots in detective novels and especially Finland has one of the finest curated detective novel series (Sapo). Although “Girl With Dragon Tattoo” opened the flood gates, it would have not been possible without the pioneer work of Henning Mankell & Håkan Nesser, to name a few. And funnily enough, also they are currently witnessing surge in their popularity.

3. Turn your weaknesses to strengths
Especially during this time of year, all the Nordic countries might be depressing places. It is dark and although they really do not have that much of problems, those few problems are visible. Drunks are on the streets and it is quite unlikely that you have not witnessed some violent outburst. Whereas other countries sweep the problems under the carpet, part of the social-democratic ethos is that society should take care of everyone. When it fails, the visible problems serve as constant reminders for everyone about the failures of individuals and the whole collective who has left them down.
Although there have not really been serial killers in Nordic countries (only handful based on Wikipedia), the Nordic Noir writers excel in those dark narratives of twisted killers and mixing it up with cultural peculiarities. Big part of the appeal of the Nordic Noir novels is the faulty detective heroes. They struggle with their own personal demons, whether it is booze, drugs, women or short temper. Most of the times, it is combination of all these.

4. You do not need to compromise
Twenty years ago it would have been totally unheard of that there is bestseller with a main character called Joona Linna who is operating in Stockholm. You would have been forced to try to do something more universal and write agent stories spanning different continents. When you write about something you know, you write with real feeling and express your true emotions. Audience identifies with that reality everywhere. That is more universal than your protagonist jetsetting around the globe, driving latest cars and having the latest gadgets. No offense, 007.

5. Remember your local roots, but think global
Digital revolution has helped these writers to expand their reach and connect with their audience. First thing I did when I found “The Healer” by Antti Tuomainen in Singaporean library, I immediately went to like his Facebook-page to show the support. Digital tools enable these authors to connect and reach people, which would have been almost difficult before.

For those new to the genre, I recommend especially Harry Hole –series from Jo Nesbo. Books are packed with really thrilling plots, starring the half-man half-amazing, who fixes his gun-blasted jaw with duct-tape and carries on. That is how you roll in Oslo.

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Stop Being in Brand Bubble and Smell The Roses

Because I work in advertising, I focus more on the advertisements than normal person. After spending the whole day crafting strategy, I have to always remind myself at the end of the day, that no normal person really cares that much.  Serves as a good reminder before I bore non-advertising people at the dinner table. It is natural human tendency to place high value for something just because we spend much time with something. Being important for you does not equal being important to everyone, not even anyone else.

Marketers fell victim to similar thinking and end up living on their own “brand bubble”. When you live and breathe your brand everyday, you start become blind to its real meaning in people´s life. Usually that meaning is quite limited at best and totally obsolete at worst. Therefore it is always important to try to escape your brand bubble, go talk to real people and keep these five points clear in your mind:

1. Product feature is not a product benefit.
Consumer decides the product benefit, not the company. Even though you introduce product feature you have been developing for years, if the consumer does not find use for it, it is completely useless. You have to dig deep to really find why target audience uses your product or selects your brand. Sometimes the truth might be bad news for your brand (see 5.)

2. Do not follow your category: differ from it
I think that benchmarking your direct competitors is one of the biggest traps marketers fall. Usual fallacy is that when you conclude that your whole category is boring, you end up being boring yourself. Benchmarking should be used only in these two ways:

  1. Analyze what your competitors are doing and do something totally different.
  2. Benchmark other categories which are successful and use those tactics in innovative ways (Utilize retailing tactics in luxury products or vice versa, make your service a product, sell subscription model, etc..)

3. You compete against everyone, not just your category
Especially with digital, you are on the battlefield with the best ones in the world. On YouTube you are competing with Ylvis. On Facebook you are competing with the friends of your target audience. On Twitter you are competing with biggest opinion leaders in the world. You better be interesting or go home.

4. Being simple is being confident.
If you can make people to remember one thing about you, you have already succeeded. Usually marketer wants to tell too much. You have been spending time doing all these different features, which you mistake as benefits and want to cram them all on one banner ad. Telling too much is turn-off. You should intrigue the curiosity by letting the audience have the opportunity to find out more. Too many times we tell everything immediately, so there is nothing left to say and learn. Sexy lingerie is more erotic than nudity, because it leaves room for the imagination. You should do the same with your brand.

5. Be honest about your brand.
Does your market share represent the true strength of your brand? Many times especially with FMCG brands, you realize that the biggest selling brands might actually have quite low brand equity. They are just big because of the price point, logistics or lack of real competition. And there is nothing wrong with that if you know where the market share is coming. Low brand equity poses a threat for rapid market share loss because of the price competition. For example, your category might not yet been affected by private labels, but that does not mean it will not happen. Knowing the real health of you brand is really important, so you can prepare yourself for the upcoming challenges.

Every time you start falling too deep in your own brand world, go back to these five points and remember that you play only small role in the world on your audience.

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What CrossFit Can Teach You About Branding

Those who read my post last week will already know that I have not yet become totally cynical to the art of marketing. I fell victim to good branding once in a while. I have been reminded of this gullibility, because lately I have desperately wanted to start CrossFit.

For those who are not in the know, CrossFit is an intense exercise program characterized by functional training using non-traditional weighlifting equipment (such as kettlebells). It has been probably been the hottest thing lately (especially among guys) in exercise circles and become quite mainstream in last couple of years. Reebok is also betting heavily on the rise of CrossFit.

I am already sports crazy. I run and do circuit training every morning, play in two basketball teams and try to swim once in a while. I do not really need any additions to my sports regime. I am healthy enough. The urge to start Crossfit is not rational decision. It has been branded well. It feels natural, because the exercise is functional. It feels total antithesis of the shiny gyms: many times CrossFit-sessions happening in the old warehouses. It has strong ethos of pushing to the limit, which resonates well with my view of sports in general. Exercising is not supposed to be fun. Only pain brings gain.

However when I was searching for the alternatives for CrossFit training in Singapore, I was shocked by the steep price tag of monthly prices. You should not really pay over 200+ dollars for basic circuit training in shitty warehouse. Or should you?

This is the inner dialogue I had:

Left brain: Hey that guy just took your our basketball summer training and is now charging hundreds of dollars a month from a glorified circuit training!
Right brain: But I want to push tractor tires to feel like a man!

Left brain: You push yourself too hard even in your morning jogs, CrossFit can actually destroy your muscles.
Right brain: Whatever, I want to train until I puke.
(Actually I heard a rumour that Red Bull sales increased when there was news coverage about alleged deaths of mixing Red Bull with Alcohol. Danger attracts.Also a vast majority of the news stories about harmfulness of different sports are written and shared by people who just want to find excuses for not exercising)

Why Crossfit is currently so appealing?

1. Proven business model
Crossfit.inc (founded in 2000 by Greg Glassman) follows in many ways the same success formula of the rise of “Les Mills”-branded classes, best known for Bodypump-classes. They license the Crossfit name to gyms for an annual fee and certify trainers. Licensing business is one of the most profitable types of business in the world.

 2. Room for creativity
Whereas Les Mills feels more like the McDonald´s of Gym Exercise (it is the same in every part of the globe), CrossFit still feels like a rebel alternative for it. Every CrossfFit-training can be different and the possible variations for the training are infinite.

3. Perfect training type for digital office worker
No-frills type of training feels perfect antidote for the overtly digital world we are living in. Also the sessions are high-intensity short bursts, which you can easily fill even to the busiest calendar.

4. Fueled by social media
I doubt that the sports would not be as big without the connected world we are living. There are CrossFit-forums, Facebook pages and endless amount of training videos. After watching this video by Finnish CrossFit-hero Mikko Salo, it almost felt I was training myself (150k views, btw):

5. Good story to tell
Exercising should always be about your own health and development. The truth is though that many times people exercise also for the bragging rights. CrossFit just sounds way cooler than being in Spinning. No offense to Spinning.

I probably try CrossFit despite the steep price tag. If no for other reason than to give a nod for the branding well done.

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