Next Gen Subscriptions

Robbie K Baxter
Nov 23, 2020 · 6 min read

The Membership Economy, Part 2

paying with a credit card
paying with a credit card
Photo by Christiann Koepke on Unsplash

People are always asking me “What’s next for subscriptions?” It’s hard to answer, because in this increasingly crowded space, everyone seems to have a subscription offering, and each one is a little different.

However, the one challenge all organizations seem to be facing is how to build a subscription in an interconnected world.

Subscriptions, First Generation: Subscription as Point Solution

When I was growing up, subscriptions were fixed and inflexible. The subscription offering was the same for all subscribers, as was the way it was priced and how it was accessed. Your subscription to your newspaper meant that you got the same newspaper everyone else got, delivered to your home on a regular schedule. Your association membership might have been discounted for new members or emeritus members, but for the most part, everyone got the same thing.

Your subscription to Netflix was just for you, and completely independent. It didn’t matter what kind of computer you had, or DVD player, the subscription just worked. And when bigger, longstanding companies like Unilever, Electronic Arts or Nike experimented with subscriptions, these business initiatives were run independently of the organization’s core offerings, and often with separate software systems and business processes.

Up until recently, it was enough to just have basic subscription offering. In many cases, It was the company’s only business, or off in a corner and run separately from the rest of the company’s operations. The subscriber was an individual and had a user ID and password created specifically for that subscription. Subscriptions were lightweight, independent, simple “widgets”. Just having the ability to take automated payments on a regular cadence was enough.

Subscriptions, Second Generation: Subscription as Systemic

Oh how the landscape has changed.

Today, most organizations are thinking systemically and holistically about their subscription offerings.

Many organizations start with a simple solution to manage ongoing payments. This can be a great way to start while you’re testing your initial experiments and optimizing around product market fit. But as the team learns about their subscribers, they’re going to start wanting more flexibility. They’ll want more payment options — you never want to lose a subscriber because you don’t accept their form of payment. Beyond currencies, you’ll also want to be able to accept everything from Paypal to Venmo to credit cards to a direct line to the subscriber’s bank account, as well as all of the emerging payment systems.

Being able to pause and re-activate payments is becoming an industry standard that consumers expect, and managing passive churn by working directly with payment processors is probably the easiest way to improve retention, but it’s complicated to do.

These are the kinds of capabilities you need to think about if you want to launch a subscription offering in the current environment.

On the back end, beyond just managing payments, you’ll find that the technologies needed to support this business are proliferating.

You’ll have the platforms that help you deliver the benefits you want to provide — you might want platforms to help you offer community benefits, access to various types of content, the ability to offer classes and other learning experiences, and even live interactions with presenters and with one another.

But you’ll also want to be able to move the data you’re collecting about your customers around the organization, to make it accessible to your functional departments — supply chain, marketing, sales, finance — everyone’s going to need something.

Very few organizations have a single “one size fits all” offering for all subscribers. Depending on when and how you signed up, what features you use, and the size or depth of your usage, there might be dozens of different price points. Organizations want to offer subscribers the ability to seamlessly access other, non-subscription products.

For example, StitchFix offers the ability to shop their clothing, as well as to sign up for their curated “Fixes” with items selected by their stylists. Electronic Arts lets subscribers buy some titles while accessing a fuller catalog with a lighter touch via subscription. And Software-as-a Service companies might have unique pricing for nearly every customer, once you consider onboarding, support, usage, and organization size.

Scott Galloway, professor of marketing at the New York University Stern School of Business, talks about the rise of Rundles — recurring revenue bundles of value. And indeed, they’re everywhere you look, with several permutations:

  • Bundles of benefits pulled from across your own organization, like AppleOne
  • Bundles of benefits that a larger organization gathers and combines from other organizations, like what cable companies have historically done with premium content, or what many curated subscription boxes offer
  • Bundles of benefits where multiple organizations collaborate as peers and sell their combined offering on each of their sites

These bundled offerings, when done well, can better align the value being offered on an ongoing basis with the ongoing goals of the subscriber, for a powerful forever transaction.

I tend to encourage my clients to keep their product options simple, and start with a single subscription offering. But even with a single subscription offering, you may still have all kinds of relationships with your longtime customers who may have bundled services, subscribers or offerings.

From the customer perspective, it seems only natural that all of these options be offered through the same system, and managed in an integrated and logical way. But making it easy for the customer can be really complicated.

I recently asked a data scientist at StitchFix, one of the most analytically sophisticated subscription-oriented businesses, what his one piece of advice would be for a company that was “new to subscriptions” today. His answer? “Make sure you know who your best customers are, and why they like you so much.” This is not necessarily about the technology they use, but tracking the right data can really help you understand your customers more thoroughly.

“Make sure you know who your best customers are, and why they like you so much.”

In this highly complex world, even the definition of “customer” is not straightforward. What if you share your password with your family? I have three kids, with very different usage patterns. My experience would be a lot better if every software company, every content company, could give the kids their own identities within my account. And then, when they’re ready to go out on their own (i.e. pay their own bills), wouldn’t it be great if they could take their preferences, usage, history, etc. and maybe stay connected to me in some way?

This is a bigger challenge in instances where I might be accessing the subscription through my employer, or my apartment complex, or my college.

What if I can’t remember my password and prefer to use my Facebook account or Google account to log in?

And what if the organization provides a freemium subscription as well as a paid one, and I have set up multiple free subscriptions over the years — is it possible to integrate them all into a single identity, acknowledging all of my email addresses, social media accounts, and credit cards?

Regardless of how I log in, where I log in, or who’s footing the bill, I’m still me, and I want to keep my history, wherever I go. That is harder than it sounds though.

The tech companies call this identity management — and increasingly, it’s something that subscribers expect to “just work”.

What does this increased sophistication among consumers and increased complexity in systems and offerings mean for organizations?

It means that you need to be really disciplined in understanding the requirements of your new membership offering. Think beyond just the basics of being able to accept payments as a subscription.

Look at your offering from the perspective of a real customer (name them — put their picture on your wall!) and walk through the whole customer journey. What brought them to you? What do they expect? What other relationships do they have with you already? Do they have relationships with other subscribers or users of your offering?

Now look at this “forever transaction” from the perspective of your colleagues. What information does each functional area need? How do these subscribers impact the objectives across the organization? How will you be able to tell where you are doing well and not so well? And if you know you have a problem, do you have the right levers to make adjustments quickly and easier?

More than having the right technology to do these things for you, you need a mindset, and a manager, asking the right questions.

When you’re building forever transactions, you need to think holistically and look out on the horizon. Optimizing for your subscribers is a never-ending journey!

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Robbie K Baxter

Written by

Author of THE FOREVER TRANSACTION & THE MEMBERSHIP ECONOMY; Leading expert on membership models and subscription pricing.

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +785K followers.

Robbie K Baxter

Written by

Author of THE FOREVER TRANSACTION & THE MEMBERSHIP ECONOMY; Leading expert on membership models and subscription pricing.

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +785K followers.

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