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.
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?