
By Amanda Rodhe on in Ecommerce
Is it time to rethink your subscription model?
For a long time, brands went hard on subscriptions. It started with the obvious stuff, like subscriptions to digital publications. But somewhere in the 2000s, it went wild. There was a subscription for everything.
It was an appealing business model for brands. Folks sign up, you deliver your product or service, and you get guaranteed recurring revenue each month.
But at a certain point, things went awry. Recently, I had a conversation with someone who lamented the proliferation of streaming services. “I wish there was one place where I could watch the shows I like instead of having to subscribe to six different platforms to watch one thing on each.” Isn’t that just…cable television?
In some ways, subscriptions have been victims of their own success. When Netflix was the only player in the game, it made sense to subscribe. But now that there are multiple platforms you pay for and only one show on each you actually enjoy, the subscription model has become burdensome for consumers.
Netflix’s recent stumbles–and subsequent announcement that it would start running advertising–are perhaps the canary in the coal mine for subscriptions in all industries.
Subscriptions are not the magic bullet we’ve been treating them as. So what are subscriptions when they’re at their best? And is it time to get rid of yours? Ask yourself these three questions to assess where you stand.
In some ways, subscriptions have been victims of their own success. When Netflix was the only player in the game, it made sense to subscribe. But now that there are multiple platforms you pay for and only one show on each you actually enjoy, the subscription model has become burdensome for consumers.
1. Does your subscription solve your customers’ problem?
Great brands are focused on providing value for their customers above all else. So start with that basic question: Does our subscription service help our customers?
Subscribing to music? Yes, it’s great for consumers. They can carry every song they’d ever want in their pocket without taking up any storage space on their phone.
Subscribing to a dog toy delivery service? Probably not. After a few months, their house is overrun with half-chewed squeaky toys, and they want to cancel.
If the subscription is more about the recurring revenue for you than the benefit to the customer, that’s a red flag.
2. Is it truly sustainable?
While recurring revenue is great, it also means you’re on the hook to regularly deliver the product or service you promised. Are you equipped to do that? And will your offering continue to be relevant and appealing to customers as time goes on?
This is one reason subscriptions for non-consumable items don’t always work. Eventually, the customer ends up with a surplus of things and cancels the subscription.
And yet, having a consumable product isn’t a guarantee of a successful subscription model, either–look at Blue Apron. After exploding onto the scene, things petered out for the meal delivery kit provider. They’re now just one of the dozens in the space, and their lack of differentiation means a turnaround will be tough.
Creating a sustainable subscription model is as much about addressing your customers’ needs as it is fine-tuning your subscription design, strategy, and execution.
There’s a lot to unpack here, but some questions you should consider are:
- Is the supply chain there to guarantee regular delivery of raw materials needed for production?
- Do you have the packaging, warehouse space, and team to fulfill orders?
- Does your pricing and ordering model incentivize customer retention?
- Is your offering differentiated enough to withstand competition from other subscription businesses?
- What’s your website UX like? Does it enhance the customer’s subscription experience?
Your organization’s leadership must seriously consider these questions. Be honest about your business’s limitations, and don’t fudge the truth to try to make a subscription model happen when you know deep down you’re not able to deliver.
3. Does your subscription program strike the right balance between generating recurring revenue and providing customers with autonomy?
Things happen in life, and people need the flexibility to alter their subscriptions. Does your subscription give your customers the latitude they need to make your service work for their lives?
When the only options customers have are subscription or no subscription, you likely force people unnecessarily into the no-subscription camp. At the same time, you don’t want to make it so easy to pass over scheduled deliveries that your customers opt out of your subscription too regularly.
On the customer experience side, control is key. Is it easy for them to skip or postpone a month’s delivery if they’re on vacation? If they want to change their subscription plan, is it a seamless experience?
And if they do wish to cancel, do you make it impossible? Have you ever tried to cancel Amazon Prime? There are multiple misleading CTAs throughout the process that try to trick you into opting back in.
A titan like Amazon may be able to get away with that behavior, but being shady with customers is a great way to undermine your company’s reputation. Rack up a pile of grumpy online reviews from subscribers, and you will have a problem on your hands.
Deciding what to do with your subscription service starts with asking these three big questions about your current program. If the answer to any of them is no, then it’s time to reconsider your approach. There are plenty of ways to grow revenue, but forcing your organization and your customers into a model that doesn’t make sense is asking for trouble down the line.
If you want a partner to help you think through your subscription messaging, website UX, or anything else to strengthen your subscription approach (or pivot away from it!), let us know.