Subscription-ability (Expressed as “S”)

Second title: Why building a subscription business is fucking hard:

I proposed to Lena with a video that had pictures of our past few years together. There was a bunch of free softwares out there to help me do this, but one specific one was really good (Animoto). At the time, Animoto only had annual commitments, but they offered a monthly payment plan and an annual payment plan which was 20% cheaper (a fairly standard pricing structure). Being cash strapped (and not really planning on making more videos) I picked the monthly pay plan.

Video creation went great, she said yes, but a few weeks later I lost my credit card (which was hooked to Animoto). Needless to say, I didn’t update my payment account, and Animoto stopped asking me to come back after the third time. I got what I needed, and I wasn’t going to go back.

Building a subscription business is hard because it:

involves solving for a recurring problem

for a buyer that incurs (and perceives to incur) that problem

in close & regular enough intervals

where the pain is at a greater than modest annoyance level.

Let’s decipher all of that:

Recurring problem:

Business are there to solve a problem. Period. If you don’t understand this at it’s most basic level, you have no business starting a business. The problem could be as simple as the need for food or as complex as the need for entertainment/Inspiration (Instagram) or the need for self-actualization (Udemy). Nevertheless, they are solving a problem.

The recurring nature of the problem has to do with the time and entropy. As time goes on, shit gets out of whack, so whatever “problem” you had solved for comes back.

Time has past and now you have a beard, Dollar Shave Club, time has past and you need shelter, pay rent, time has past and you need medical attention, hospital. The point is, you need to understand the identify of a problem and see if this problem occurs in a recurring fashion.

for a buyer that incurs (and perceives to incur) that problem

More important than the recurring nature of the problem is the question of perception: Do the people who have this problem understand it as a recurring problem. The recurrence of the problem is only half as important as the perception of recurrence.

Changing perception is very difficult, so try to not educate people. That’s not your job. Your job is to find what people perceive, not influence it. Influencing perception is the job of politicians and multi-national conglomerates and lobbyist. Stick to solving problems and building companies.
Education is one way to influence your customers desire to solve their problem in your proposed structure. There are other ways also (deeply preferential pricing, bundling, etc).

Close enough & regular intervals:

Thankfully, humans are great at forgetting (otherwise, living through the pain that is going through grade school and doing homework would crush us for eternity). With this blessing; however, subscription businesses face a true challenge: you’re going to have a hard time selling something to someone when they don’t realize that they have to wrangle with this pain on an ongoing basis (again, there is the perception vs reality thing here, and perception wins, so make sure you’ve defined the problem as your customer is going to).

The second part of that phrase is “regular”. If the intensity of the problem changes at each showdown, then you haven’t defined the problem correctly.

“Transportation” is a problem, but the product for walking to the store and driving to work and flying to the Bahamas are very different.

Also, if the frequency is unpredictable, again, you haven’t defined the problem correctly.

“Legal issues” is a problem, but the product for reviewing contract and hiring employees is very different that the work required for doing M&A due diligence and fundraising negotiations.

Greater than modest annoyance levels:

Humans are creatures of habit. If a problem has only low levels of annoyance, then we’ll create a habit around it to deal with it as oppose to solve it all together. An example of this is getting hungry in most western countries. We get hungry on an ongoing basis, but the solution for it is not annoying enough that would make us want to figure out how to get rid of its root cause. The level of annoyance is not high enough.

At the end of it, it’s the question of finding the right problem, not finding the right solution:

Find a problem where those who have this problem have the perception of it happening frequently and at close-enough and regular intervals when the level of annoyance is higher than minimal.

Final note: when setting the frequency of payment, you have to set it at intervals that are greater that the frequency of the perception of the problem. So if the perception is every 4 months, setting the frequency at monthly intervals is HARD!

This is my interpretation of Subscription-ability. There are others.

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