Tag Archives: subscription model

The Thin Line Between Serving or Screwing You Up

“The easier you make the refund process, the more refunds happen”
Morgan Hermand-Waiche (CEO, Adore Me)

You could sell almost anything with subscription model. The dilemma for the company is how difficult or easy you make it to opt-out. On the one hand you don´t want be regarded as a fraud by having too difficult billing scheme. On the other hand, you don´t want to make it too easy to get away from the program either.

“Any recurring billing scheme is problematic from a customer service standpoint unless you err on the side of the customer even when you may not be legally obligated to.”
-Sucharity Mulpuru (Forrester research)

The ugly truth of business is that majority of our loyalty is actually laziness. The best situation is that you truly love your subscription service and it gives a great diversity and value (e.g. Spotify, NetFlix, your gym and other entertainment services). Quite often your subscription is quite boring and if you could end your subscription right now with one-touch of button you would do it. But because there is no that button, you keep on going on because it is ok.

The perception of difficulty is sometimes more valuable than being truly difficult.

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How Shopping Bags Revolutionized Retail

Have you heard about Walter H. Deubner?
 
If you have not, you should be ashamed. By simple observation and great insight, he was able to create good business for himself and the same time changed the way we shop.
 
He invented shopping bag.
 
Small business grocer Deubner noticed in 1912 that his customers always bought as much they could carry. Not more and sometimes less. He designed the way for customers to buy more items on one go. He patented the idea and in just three years he was already selling over million shopping bags a year.
 
That invention revolutionized shopping, as we know it.
 
Quite often our consumers would actually buy more, but they do not realize the opportunity or have barriers for doing it. Too often we are too fixed to the traditional way of selling our product that we do not recognize the barriers that prevent current consumers to buy more, or new consumers to enter our category. Coming back to the post I wrote earlier this week about subscription model, there is huge potential in rethinking the way we sell:
 
Could you sell single item in bulk?
Or bulk item as a single?
Physical product online?
Online product in retail?
Supersize it?
Minimize it?
 
Walter H. Deubner essentially created post-purchase service. Consumer journey seldom starts or end in the transaction.

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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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