Over the last few years, industries everywhere have begun to adopt subscription-business models. Customers can subscribe to almost anything, from mobility services, food box services, and OTT media services, to getting home essentials delivered.
For many of us, subscriptions are how we purchase and consume goods and services in both our personal and professional lives today. This growth symbiotically satisfies changing preferences and gives us access to a wider range of experiences vs. pure ownership. It also helps businesses monetize value-added services, create new sustainable revenue streams, and develop better customer stickiness to the brand in the long run.
Despite economic uncertainty and inflationary pressures, the appeal of subscription services remains strong. Based on research by Barclaycard, a sizable number of subscribers believe such services offer good value for money and help them manage their finances better at a time of rising costs.
Respondents to the survey cited convenience, reassurance that key products will be regularly delivered, and the ability to try new items as the top reasons why people subscribe. Hence, businesses remain bullish about the future of subscriptions with seven in 10 (69%) forecasting the subscription economy will continue to grow.
Furthermore, great subscription value propositions are not just about lower price: research shows that even in times of inflation, subscribers are willing to pay for higher value.
Based on research from PYMNTS and sticky.io, over 66% of retail subscribers enrol to new services to pursue better user experiences that they categorise as enjoyable or convenient, underscoring the importance of smooth experiences as a driver of subscriber loyalty.
But, with more choices of subscription-based offerings available in the market, subscribers are becoming more selective and demanding consistent value delivery over the duration of their subscriptions.
This shift has sparked companies to dramatically change how they work. Companies are embarking on their own journeys into this new world, one that’s quite different from the old way of doing business.
Unlike one-off purchase models, subscription-based usership requires constant focus on the user’s experience to ensure they continue to be satisfied with the product or service they receive and continue to subscribe.
So, what are some of the common traits of a good subscription-based offering?
First and foremost, the move to subscriptions is not an overnight change. It requires a 360-degree change across the multiple organisational functions from sales, product, marketing, IT, finance, and customer success teams.
The best-in-class subscription champions focus on five key competencies to support their Journey to Usership with varying levels of efforts based on where they are in their subscription journey—pre-launch, launch, optimise, scale, or lead.
The key is to be always in a beta mode and apply an agile and iterative approach.
In order to design highly personalised customer experiences, we need to understand the five key stages within the subscriber lifecycle: discover, evaluate, subscribe, use, and renew.
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Let’s now look in more depth across the lifecycle on some critical concepts. We’ll look at these concepts from the customer’s perspective alongside the business view.
The starting point for any subscriber is having brand awareness of the products or services available to them. Buyers go everywhere for information from self-directed research checking social media to syndicated content and category or industry-specific resources. Therefore, organisations need to work hard at creating brand awareness and engaging subscribers effectively through digital channels to ensure their products and services are included in a potential customer’s initial consideration stage.
Creating awareness of subscription products and services requires thoughtful marketing campaigns that sell a lifestyle and an overall experience, not just a product.
To achieve this, businesses really need to understand their subscribers’ needs and position products and services toward these needs. This is the start of a personalised journey.
This isn’t exclusive to subscription products, but it is a necessity for them. Consider Apple. Its products and services have a very strong identity and familiarity to them, but the company has also successfully positioned the brand as a way of life.
GoPro’s subscription service offers unlimited cloud storage, premium editing tools, guaranteed camera replacement, and exclusive product discounts, which, as a package, make it easy for subscribers to access their content anywhere and from any device. Originally launched in 2016, GoPro found its growth through subscriptions which have now surpassed 2 million (as of 2022), delivering a customer-centric value proposition backed by the direct-to-customer strategy.
Many of Refinitiv’s (now LSEG) subscribers had limited awareness of other product offerings that would be beneficial to them because they were often deep users of only one product. Refinitiv has a huge product range, which also made it challenging for users to understand other products that would benefit them.
Refinitiv and Clarasys used the amalgamation of their self-service platforms as an opportunity to build awareness of other offerings. This was done by utilising the information they had on existing subscribers to hyper-personalise content in order to raise awareness of products. This resulted in a 300% uplift in enquiries.
As subscribers transition from initial awareness to the evaluation stage, subscriber-centric activities such as offering a free trial or freemium models, product/service reviews, and recommendations from trusted sources become relevant.
At this stage, it is essential for brands to understand the customer’s evaluation and decision-making process in order to mitigate indecision and reduce ‘loss rate’.
By understanding subscribers’ differing needs and adapting to them, organisations will see the most success. A subscriber will sign up if they are offered the right product via the right channel at the right price point and at the right time.
Creating content that resonates with subscribers’ problems and allows them to understand how a product will solve these issues are significantly more likely to lead to a successful sale. In order to realise longer-term customer value, it’s important that subscribers feel they have made the right decision in subscribing to a product or service.
Although companies can achieve high sign-up rates without thinking about this, the longer-term success of subscription businesses lies in acquiring and retaining subscribers. That means offering content that helps subscribers reach a decision.
In this context, friction can, in the long term, be a good thing. If a customer is about to make an expensive purchase, they might understandably have a few doubts. By slowing the customer down and offering reassurance that the product is value for money, they can be eased towards the purchase. Some subscribers might regret an expensive, knee-jerk purchase and cancel their order a few hours later, so adding friction here can be helpful.
For example, Amazon offers a buy now feature but it also shows product comparison inline and the ability to add items to a wishlist. It provides the customer the ability to evaluate and debate their decision without having to leave the app or come back later.
This approach also applies to B2B environments by providing subscribers with evaluation materials and building some consideration time into the sales cycle. Sometimes good things come to those who wait. But good things more often come to those who understand how the customer evaluates and provides them with the right things at the right time.
Zoom entered the market in 2011 when it was dominated by Cisco and Citrix. During that time, companies offered free trials and a few freemium offerings, but none of them gave potential users full access to the product. For example, Cisco provided only a limited number of user licenses.
Zoom offered choices in terms of ‘Freemiums’ where subscribers could trial the full product capabilities for 40 minutes but would eventually have to upgrade to a paid tier. They didn’t stop there and offered a choice in terms of add-ons like Zoom phone and Zoom rooms. In fact, 55% of Zoom’s 100,000+ subscribers (at the time of the IPO subscribers) used Zoom’s basic offering before moving to a paid tier.
Dropbox, for example, offers a free trial for a full 30 days. By offering subscribers the chance to explore its “Advanced” plan, they’re more likely to wow them with features. And once the trial is up, Dropbox follows up automatically and offers to shift the potential customer onto their chosen subscription plan quickly and easily.
Omdia (Informa Tech)
Omdia was formed following the amalgamation of two technology intelligence brands. From the outset, different persona needs and user journeys were at the heart of the product’s design.
Customers are able to sign up and experience the product without paying a penny and although they can see the synopsis of all content, they can only access limited pieces of content. This is a common approach to giving users a flavour of what the full product offers.
The product is customer-challenge focused and navigation and search capabilities are tailored to the challenges and needs of subscribers so that they can quickly get to the most useful intelligence. This allows for rapid evaluation of the product and teaches subscribers early that the product offers them a tailored experience.
This is the stage where a subscriber commits to a brand’s product or services. It is also the stage where brands need to influence the moment of purchase thus making it easy for subscribers to sign up or provide options to pay.
With subscription products, the customer’s journey and their relationship with the company are only just beginning at the initial point of sale. With one-off purchases, dissatisfaction does not have as direct an implication on revenues. At point of sale (PoS), subscription companies need to consider what will hook the customer and nurture them through their first few months in order to build loyalty.
Subscribers who have a poor onboarding experience and a feeling that they have been forced into a package that can’t be tailored can result in them leaving quickly or not signing up at all.
If there is a problem a month down the line and flexibility (e.g. flexibility to pause, resume, upgrade, downgrade, or flexibility in choice of payment methods and changing payment frequency) has not been considered as part of the subscription, the customer could become frustrated. It is important to start with the customer first and maintain a good relationship by adapting to them from the moment they sign up and throughout their lifecycle.
Choosing the best model for your business ultimately comes down to who your subscribers are and what they need. For example, GoPro targets a fairly monolithic customer type looking for a relatively simple transaction—”a buy it and use it” package. Whereas, AWS serves large enterprise subscribers expect solutions that have been completely tailored to their particular needs, the polar opposite of GoPro.
Let’s talk about The New York Times, which has seen a twentyfold growth and consistently exceeded its subscriber acquisition targets over the last 10 years, with an impressive 10 million (and counting) paying subscribers today. NYT offers a “Basic Access” package for $1 per week with the option to cancel or pause at any time. This is backed up with outstanding experience delivery over the course of the subscription to drive subscriber loyalty.
The company also drives data-led insights to understand subscriber usage patterns and offers tailored renewals such as an “All Access” discounted bundle to a super-active user.
The “All Access” bundle may include additional services like cooking recipes, crossword games, in-depth sports coverage, etc., with an optional free bonus subscription to a family member. As a result, NYT not only monetizes existing super-active users but also develops a new subscriber base to cross and upsell to.
This is the stage where a subscriber builds expectations (post-purchase) based on usage and experiences across multiple touchpoints with the brand. It is essential for brands to deliver added flexibility and positive experiences at various touchpoints with the subscriber, as this shapes their opinion for usage and retention-related decisions.
Keeping subscribers engaged in products is critical. Ensure that usage is considered a part of the sales cycle, with marketing and product teams working together to ensure the customer is aware of the benefits and is fully using the product. This will increase propensity to renew and/or continue the subscription month on month.
In a world where subscription and consumption-based models are now commonplace, it is more important than ever for subscribers to constantly see the value of products or services. This means offering something that continues to deliver on subscribers’ expectations; it means being adaptable to their needs, and being competitive and flexible with pricing models.
Customers will become frustrated with a service that doesn’t work for them. For example, a coffee subscription that only delivers large bags of coffee beans at a frequency that cannot be tailored will create waste if they aren’t consumed within the use-by date and eventually cause a customer to unsubscribe.
Customers are savvy and will only put up with this imbalance in value for so long.
Visma, a leading European supplier of business-critical software, almost doubled its number of new subscribers when it started using a Zuora platform because it provided subscribers with a better view of what they were actually paying for.
Based on data from the Net Promoter Score (NPS) rating for specific subscribers, the team now clearly sees who the high value/low NPS risk subscribers are and runs campaigns to save them. This helps the organisation make better fact-based decisions around its pricing strategy and the company has chosen to simplify its product catalogue to deliver better customer value.
Nuffield has created the largest network of physiotherapists in the UK. These services are accessed via insurers, employers, and directly by subscribers. Nuffield tailors these services to subscribers’ needs by offering a range of consumption and fixed subscription models. It also offers a range of products from video exercises to bespoke treatments. This means whatever the change in circumstance of its buyers, the company is always able to offer a tailored service.
On paper, this is the stage where retaining the subscriber and increasing the Customer Lifetime Value (CLV) becomes a priority. However, if brands have been considerate of the customer in the earlier stages of their lifecycle, this stage is simple and predictable – subscribers renew/do not cancel.
This stage is the result of everything discussed so far.
If organisations invest in touchpoints and subscriber engagement strategies earlier, they will improve stickiness and eventually build active brand loyalists. This requires brands to design and integrate all subscriber-facing functions and business processes from marketing, sales, customer success, finance, and revenue operations.
Two things are essential to ensure proactive subscriber lifecycle management:
Everybody has a part to play in the customer’s experience. Instilling this in every employee’s mindset and behaviours will have a direct impact on customer retention and advocacy.
Consider a check-in assistant at an airport. If their duty (and even incentive) is to please the customer, they will be aiming to ensure a smooth check-in so the customer comes back again and recommends them to others.
If their duty is to follow processes and drive revenue for the business, then they will be aiming to get more money from the customer and be inflexible in how they service them which leads to a lack of advocacy and loyalty if the situation doesn’t please the customer. For one-off business, this is less of an issue but in subscription models, it is essential the customer remains loyal for as long as possible.
Traditionally, ownership of B2B subscribers passes between functions in a lead to billing flow such as: marketing → sales → product → service→ finance.
In subscription models, this is more complex as a customer will be in constant interaction across the lifecycle with marketing needing to drive low-contact upsell and retention activities. The line between the product and sales becomes blurred because offering flexibility may mean changing the bespoke package on a monthly or yearly basis to suit needs. Billing, of course, is an ongoing process in the subscription world and will need to be able to adapt to changes in consumption.
Guitar manufacturer Fender’s research showed that 90% of people who started learning to play the guitar quit within six months. As a response, Fender, the world’s largest guitar maker, launched a subscription-based online guitar learning platform called Fender Play offering a personalised learning path designed to dramatically reduce their subscribers’ abandonment rate.
The platform not only created a new digital revenue stream with the paid monthly subscription after a free trial, but it also acted as a powerful customer retention tool, enabling Fender to leverage strategic insights on more than one million subscribers so they could foster loyalty and a profitable long-term relationship.
Subscription business models require a very different way of operating. Typical siloed functions of marketing, sales, service, product, and finance can only be effective if the end-to-end customer experience is considered, designed, and constantly managed.
The path to sustainable growth is to establish a continuous omnichannel relationship with the subscriber. Offering them the ability to be in control of their choice in your product, the way in which they purchase and consume it, and the flexibility to use and pay for a product in a way that suits them.
Ultimately, an organisation’s goals should be to deliver what the customer really wants and not what they have always had. Customers will happily switch to brands that offer them this flexibility.
Building this customer-centric organisation and culture is not an overnight change, but one which requires a 360-degree focus across multiple functions including product, marketing, sales, finance, and technology teams.
It requires a well-coordinated transformation and iterative evolution across five critical competencies, keeping subscribers as the key focal point:
Each function will play a critical role in delivering the right experience and value across the subscriber lifecycle on an ongoing basis. Hence, it’s essential to treat the infinity loop as a living, breathing process with ever-evolving subscriber needs and a continuous evolution of organisational competencies.