The Subscriptions Future: Customer Retention Forever (Part 6)

Commentary – 1

Wikipedia: “Rather than selling products individually, a subscription offers periodic (daily, weekly, bi-weekly, monthly, semi-annual, yearly/annual, or seasonal) use or access to a product or service, or, in the case of performance-oriented organizations such as opera companies, tickets to the entire run of some set number of (e.g., five to fifteen) scheduled performances for an entire season. Thus, a one-time sale of a product can become a recurring sale and can build brand loyalty. Industries that use this model include mail order book sales clubs and music sales clubs, private web mail providers, cable television, satellite television providers with pay television channels, providers with digital catalogs with downloadable music or eBooks, satellite radio, telephone companies, mobile network operators, internet providers, software publishers, websites (e.g., blogging websites), business solutions providers, financial services firms, health clubs, … as well as the traditional newspapers, magazines, and academic journals.”

Finextra: “The benefits of a subscription service extend beyond consumers to merchants themselves. The model provides them with rich data points and greater customer insights to better track consumer habits and product interests…For consumers, subscriptions are also much easier to manage – especially when those payments are made using a card … Consumer demand lies at the centre of the shift to a subscription economy. With everyone leading increasingly busy lives, time is a valuable commodity. As such, convenience and flexibility are the two most important drivers in the purchase journey.”

Tien Tzuo: I think the number one mistake that we see people make, companies make, is really to say, “Let me take my same business model of selling you a product and let me just do it on a recurring basis.” So we’ve got the whole stuff in the box market. And that’s not really what it’s about … Subscriptions are about personalization and consumption … I mean, if you look at, say, a Stitch Fix, it’s not just about, “Hey. You get some clothes.” You actually have a stylist that understands who you are, understands things are going in your life. You have somebody you could talk to. So they’re curating where they’re building the whole experience that delivers something real, something higher, of higher value that you’re really, really looking for…  It starts with the customer and it starts reimagining them as a subscriber.”

The Economist: “Investors like a business which offers recurring sales and oodles of data on customers. The Subscription Trade Association reckons global revenues grew at an average annual rate of 17% between 2014 and 2019. That encouraged venture-capital firms to invest close to $3bn worldwide in online subscription firms between 2018 and 2020, according to PitchBook Data. But finding customers is pricey and keeping them has proved hard, given high cancellation rates among those who find themselves tossing away unused products at the end of the month. Shipping costs nibble away at margins. Competition has intensified, both from a fresh influx of startups and large established firms that have launched or acquired their own services.”

Scott Galloway: “Subscription, whether it’s the move to Netflix, whether it’s the move to LinkedIn — more and more people like the idea of saying, “I don’t want my data molested. I want more privacy. I want a business model that focuses on the relationship with me.” And the smartest people aren’t pitching advertisers, they’re pitching new product ideas that enhance my relationship and make it worthwhile for me to spend $12.”

Scalefast: “Subscription services have long been a core offering for Direct to Consumer (DTC) brands. In the post-pandemic world, they are even more important than ever. 75% of DTC brands will offer subscription services by 2023, according to the Subscription Trade Association, and the global subscription commerce economy will account for nearly 20% of the market …  Subscription services offer higher margins for DTC brands, lower retention spend, greater predictability in terms of stock levels and cashflow, and a faster feedback loop.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.