The rise of the subscription model…

SO LETS HAVE A BIT OF HISTORY….

Pioneered by the printing industry in the 18th century, subscriptions were originally used by newspaper and magazine presses in order to fund large printing runs in advance.

After a decline in global newspaper and magazine sales, however, subscriptions are back. At TwelveA.M. we’ve been watching those organisations using subscription models to their advantage and the tactics they are adopting to stay on top.

SO IN SHORT, WHY THIS SUBSCRIPTION COMEBACK?….

Consumer spending traits are shifting towards more simplified purchasing demands.

People are more open-minded about shopping from home and online subscriptions can provide much better value, selection and convenience.

“80% of companies are seeing a change in how their customers want to access and pay for goods and services and 50% of these same companies are changing their pricing models as a result.”

The Economist

SO WHY SHOULD BRANDS EVEN CARE?

Take the now defunct film rental business Blockbuster, for example.

At the time when Netflix was a DVD mailing service, they offered to sell out to Blockbuster for just $50m.

Even when propositioned, Blockbuster thought it was too much of a niche business and embarrassingly declined the offer. This reinforces the idea that brands should adapt and consistently
evolve or risk being left behind.

Importantly, failure to take customer preferences for hassle free shopping into account can have real consequences for your brands bottom line.

SO WHAT SHOULD BE DONE?

Platforms like Netflix have made the model so successful that other e-tailers should re-work and pivot their long-term strategy. You can pretty much package up any product now and pair it with subscription pricing.

There are a number of subscription models available, it’s vital that you select the best for your business;

The types of subscription models…

Surprise and Delight

What is it: A Subscription model that gives the customer a variety of new and exciting goods per delivery

This is the best way to supply people with goods and test the market.

Taking customers on a journey, this concept allows you to partner with a number of brands and build your reputation by piggy-backing on that of other brands.

A great success story is Birchbox, who offer makeup and beauty treats to consumers.

Ironically, Birchbox has benefitted from getting to know their target market and are now producing their own makeup line. More surprise and delight boxes include Not Another Bill and My Little Box.

U.S fragrance subscription company ScentBird sums up this type of model well and has coined it with the phrase ‘date a perfume before marrying one!’

Perhaps this is a reflection of the millennial generation, those who like to try before they buy. The surprise and delight method is non-committal and is basically the modern day product demonstration.

“54% of Gen Y/Millennial age groups are interested in a service that detected how they were feeling and sent them surprise offers/deals based on their mood.”

The Organiser

What is it: The opportunity to subscribe to having your life admin taken care of!

Customers seem to want their life choices simplified and organised at the touch of a button. This subscription model works well when promoted in the style of a personal assistant or butler.

Positioning your brand as a way to solve life admin issues immediately attracts those who are too busy to do things of themselves. Window cleaning, newspapers, ironing, dry cleaning etc are all popular choice . Be warned though — to succeed in this market is difficult.

Customer experience and efficiency is key, make sure the service is capable of offering good services and arranging this on time.

Popular apps in the UK are Handy (handymen and plumbers online in less than 90 seconds) and Laudrapp .

Unlimited Service

What is this: One off monthly fee for endless use of services.

According to Nielsen “Nearly 70% of British people pay a subscription to watch TV or video-on-demand.’ The likes of Amazon Video and Netflix are luring the customers in with ‘unlimited’ promises.

Most of us are drawn in by a promise of endless goods and services. This might be an all you can eat buffet, continuous refills of drinks or data in our phone deal. Take note from Spotify who tempt their customers with a premium upgrade in order to get rid of adverts.

The messaging is key here, if you offer constant improvements and regularly update your services then people will remain as subscribers.

You need to provide a service that gives someone the option to personalise their account. Constant innovation and personalisation will keep the customer interested.

Convenience

What is this: Saving you the hassle of having to remember to buy everyday items.

This is ideal for a variety of domestic goods that usually run out in your home. They simplify and improve supermarket purchases. The trend in everyday products has travelled here from the U.S and are perfect for time-poor Londoners.

The goods in these subscriptions are used on a daily basis — razors, washing powder, dog food etc.. Grooming company Harry’s send consumers high-quality razor blades and other grooming products. Other convenience boxes include ScrubBox, Fings For Fido, Me Undies and Pink Parcel.

Amazon has perhaps indicated the future of subscription by inviting customers on more of a physical purchasing journey.

The Amazon ‘dash buttons’ are now available for a number of brands. This is a further enhancement of the convenience subscription model. These buttons enable the customer to order their favourite product via a wifi connected branded button in their home. So far, brands such as Playdoh, Neutrogena, Rimmel, Persil, Johnson and Kleenex are part of the dash portfolio.

“Dollar Shave Club, the #1 ranked disrupter in the U.S., is in many ways a paragon of brand simplicity. With its delightfully clean branding, uncomplicated product, and reliable service, Dollar Shave Club has thrown down the gauntlet to Gillette and other established players.”

The Harvard Business Review

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The Future

Businesses must react and implement new pricing models, listen to customers and allow them to access the services they desire, in an easy and efficient way. Every customer is unique and has different ever-changing needs, so businesses that still try to sell one-size-fits-all packages that lock customers into long-term contracts will be left in the cold. You can’t just rely on 3 subscription pricing options, the service must be personalised.

Right now, it’s clear that customers want to be surprised, have a simplified solution to everyday life, regular convenient options are highly attractive. Think about ways in which you can make the consumer life easier.

The future of the subscription model also needs to be more service orientated, this market is more competitive than ever. Brands should rework the messaging in their advertisements. Learn from Apple who has set up an ‘iPhone Programme’ a term that entices customers to upgrade through subscription tactics.

The model must evolve with the consumer — listening and monitoring how they are using the product or service. This will ensure that people don’t miss out on new opportunities, or worse, lose consumers to other competition.