Subscription Wins Tools and Resources
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Will the subscription revolution kill or cure your business?
Ten to fifteen years ago, you probably didn’t use a single subscription service or, if you did, could count those you did use on one hand. However, over the last decade this has changed dramatically. We all now regularly use the subscription services of Netflix, HelloFresh, Amazon, Spotify, etc.
Even the health and fitness sector have begun to enjoy the success of offering subscription services – Peloton and Echelon are proving that.
Have a look at your own personal situation – to how many services do you now subscribe? It could be toilet roll, chocolate, beauty products, TV, music, fresh fruit and vegetables or insurance. It is likely that you subscribe to more than just one or two, and these businesses are more successful because they now operate a subscription service.
With enough research, business planning and courage, almost any business can benefit from the subscription boom, and if you aren’t seriously looking at moving into or increasing the subscription services within your business, you are missing out on better customer relationships and the growth and the profits that this could bring.
So, ask yourself this one question:
How can I use a subscription model in my business to build better customer relationships, as well as growth and profit?
STOP thinking that subscriptions are just for digital and publishing businesses
START working out how you can build stronger, more direct, ongoing relationships with your customers
The one ‘BREAKTHROUGH QUESTION’ you must ask to help yourself…
How can I use a subscription model in my business to build better customer relationships, as well as growth and profit?
This question is important – you may be thinking that your business is not right for the subscription model or that you don’t have a product or service appropriate for a subscription service, but the likelihood is that this isn’t true.
A Google search in your industry will probably highlight a number of businesses that are already on their subscription journeys. When the research points to the fastest-growing businesses offering subscription services, how can you afford to ignore this?
Yes, it can be challenging to get started, but the risks of ignoring the subscription model are high.
Get a prototype out to the market and take it from there – it’s not fixed in stone and can be readjusted, redesigned and restructured to suit your customers’ needs. Offering a subscription service will bring you closer to your customers, making feedback and changes easier.
All it takes is some time and effort, but the benefits are there for all to see.
Challenges you must overcome if you want your subscription offering to succeed
Challenge 1: Subscription fatigue
The proliferation of subscription businesses can potentially lead consumers to tire of subscriptions and to experience ‘subscription fatigue’.Subscription fatigue is a feeling of overwhelm and frustration experienced by consumers who find themselves inundated with subscription services and products.
It is often associated with the increase in streaming services in the media and entertainment industry, but can apply to any business.Take a moment to list all the services to which you subscribe – Netflix, Hulu, Sky, Amazon and…. can you be confident you have them all?
Even if you can list them all, there will be some that you simply cannot do without. For example, if you read a lot and have an Amazon Kindle or the Kindle app, this is a must-keep subscription.
But you may eventually feel as if there are some that you could cancel for any number of reasons: cutting costs, lack of use, a change in circumstances or simply that something better has come along.
How do you stop your subscription services from being one that consumers can do without?
IMPORTANT - Keep your subscription focused on the customer, mix or regularly change the offers, reward loyalty, tailor offers. Make the subscription feel personal.
Challenge 2: Managing churn
Once you’ve hooked a subscriber, they’re yours to lose. The more you’re able to develop a 360-degree awareness of the entire customer journey, and to pinpoint both where and when customers are leaving, you’ll be able to understand why they’re doing so.
IMPORTANT: This is a particularly critical challenge for you to prioritise early on, when you’re still framing the foundational systems, processes and assumptions that will power your future growth.
Challenge 3: Scaling operations and logistics
Consistency is key for a subscription business and, although it’s challenging, it’s important to do your due diligence and try to ensure that any third parties you choose to work with are able to deliver in the long run.
Even if you’re managing your subscription business through an all-in-one platform, you’ll still have to interact with third parties for some parts of your operation once you start to scale and are unable to manage everything yourself.
Challenge 4: Pricing your offer
The subscription business world is full of competitively priced offers which can often confuse first-timers trying to balance providing value with improving their bottom lines.
It can be particularly challenging at the beginning when all sorts of unexpected costs arise. It’s even more complicated if you have a multi-tiered offering. How much extra value do you need to provide to get someone to take the leap and upgrade their plan? And for them to then consider it worthwhile enough to stick around for months to come?
If you can get a handle on all your costs (and minimise underestimation), you’ll not feel tempted to copy your competitors’ pricing (you’re unique, after all) and will have some financial wiggle room for unforeseen costs, whether it’s an increase in shipping or an opportunity to buy some extra stock to slip into premium-tier subscribers’ boxes. You’ll gradually be able to find a happy medium.
[This section is adapted from articles found on the Subbly website, a brilliant resource about subscription business success.]
Do your own subscription audit
The Economist Intelligence Unit (EIU) provides compelling evidence of the profound shift in how we do business now and how the subscription model is going to increase radically.
Of 300 senior business leaders in the United States, United Kingdom and Australia, 4 out of 5 believe that their customers are changing in the way they prefer to obtain access to goods and services. In response, 40% of the businesses surveyed are already starting to implement the subscription business model.
Do your own subscription analysis and tick the number of subscriptions you have and the amount of money you’re spending on them every month and every year (simply add the amount next to each one below and add subscriptions not mentioned here):
To what do you currently subscribe at home?
TV & movie streaming – Netflix, Amazon Prime, Apple TV, Disney+, Sky Glass
iTunes or Spotify
Bicycles - Peloton or similar
Magazine or newspaper (online, paper or both)?
What about snacks or shaving gear?
Insurance - personal, pet or item
Your Volvo or Porsche or other cars(yes, these subscriptions are available)
Toilet paper (you have many to choose from!)
Underwear and socks
GP doctor service – Babylon Health or DoctorCareAnywhere
Tea and coffee
Ready to cook meals – HelloFresh, Gusto
Music and art lessons
And regarding your business, to what are you subscribing now?
Accountancy and bookkeeping
Aircraft part monitoring and servicing
Salesforce or another CRM service
Photo images (e.g., Shutterstock)
And many other SaaS (Software as a Service) products on your phone or PC
Repair and maintenance
More examples of subscription success…
- Oddbox – Started in 2016 with 70 subscribers for weekly/monthly boxes of good quality, but oddly-shaped, fruit and veg. By 2018, they were serving 2500 subscribers and have consistently shown six-fold year-on-year growth since inception. They raised £3m of funding in March 2020, as well as a further £16m in Series B funding, to facilitate expansion plans across the UK.
- HelloFresh, the worldwide recipe box subscription, reached 75 million subscribers in 2022.
- Gusto, Freshly, Butternut Box, and Blue Apron have all now joined the growing subscription market for delivered meals, food and prepared recipes.
- Financial Times - The FT now has one million paying digital subscribers. More than half of FT subscribers are based outside of the UK. Digital journalism revenues are now equal to all of the FT’s other revenue streams combined.
- On its road to digital subscriptions, the magazine Vanity Fair picked up 13,000 new subscriptions in one day.
Business accounting software
- Intuit in 2022 served 4.5 million+ QuickBooksOnline subscribers.
- From a standing start in 2007, Xero accounting software now has 3million+ business subscribers.
- Over 60% of adults in Britain are subscribed to the Amazon Prime service; there are 200million subscribers worldwide.
- The Netflix subscriber count in 2022 was 223.09million.
- Disney+ had 164million subscribers at the end of 2022 and has only been going for 4 years.
- Hulu had 41million subscribers at the end of 2022.
- Apple TV had 50million subscribers at the end of 2022.
- On YouTube you’ll find approximately 25,000 channels with one million+ subscribers.
- Apple, one of the world’s largest and most famous product companies, has started the shift to subscription (service) income. Service revenue was $31.15billion in 2017, and by 2021 it was $78billion.
- The guitar maker, Fender, have recruited 300,000 subscribers for their Fender Play app and have a guitar purchase profile that’s 3 times better than non-app buyers.
Click here for more stats on subscription businesses – https://www.finder.com/uk/subscription-service-statistics
Marketing your subscription business – 4Ps and 7Ps
Every business student is taught the 4Ps and, possibly, the 7Ps. The basic idea is that your marketing strategy should focus on 4 or 7 areas of action.
- 1Product – rather than just creating an appealing or desirable product or service (though, of course, this is important) you also have to work out a subscription offer that people really want, building in options to suit your different buyers. My toilet roll subscription has one-off purchase offers, as well as subscriptions for 24 or 48 rolls per month.
- 2Price – your subscription should be competitively priced and, as an offering, make sense for both your customer and your company.
- 3Promotion – It’s one thing to build a product brand through traditional marketing channels (advertising, social media, direct mail, sponsorship, etc.) but subscriptions are reliant on your building a reputation for a winning subscriber experience.
- 4Place – You may have historically used channel partners (retailers, distributors, warehouses, etc.) to get to your end customer. This could change radically with a subscription model and require you to work out how to engage with channel partners differently or, perhaps, not at all!
- 5Packaging – It’s one thing to package a product or service and another to package a subscription so that it is appealing to a wide selection of subscribers. Check out Oddbox to see how they ‘package’ the offers on their website and how they put the client experience (emotional, psychological, physical) at the forefront of their communication.
- 6Process – Making, creating and delivering a one-off product or service is very different from the work of winning and retaining long-term (low-churn) subscribers. The working processes/systems throughout your business must adapt/morph to deliver a ‘worthy’ subscription service.
- 7People – The people and the culture needed to enable your business to succeed with the subscription model are different from that required by simple product/service sales and delivery. Some, and hopefully all, of your people can adapt and put your new processes to work successfully. You might also need additional skills as well.
The book and other resources
Subscribed - Why the Subscription Model Will Be Your Company's Future - and What to Do About It
When it comes to the subscription model, Netflix, Spotify, and Salesforce are just the tip of the iceberg. The real transformation – and the real opportunity – is just beginning.
Today’s consumers prefer the advantages of access over the hassles of ownership. And the subscription model is not just for internet services like Netflix and Spotify; even industrial firms such as GE and Caterpillar are reinventing themselves as solutions providers. Whether you sell software, clothes, insurance or industrial machines, you need to master the transition to the subscription model.
“The subscription model is exploding everywhere, and nobody knows how to steer through this shift better than Tien!
– Marc Benioff, Chairman and CEO of Salesforce
The Automatic Customer - Creating a Subscription Business in Any Industry
The lifeblood of your business is repeat custom. However, customers can be fickle, markets may shift and competitors are ruthless. So how do you ensure a steady flow of business? The secret – no matter what industry you're in – is finding and keeping automatic customers.
These days virtually anything you need can come through a subscription. Far beyond Spotify and Netflix, companies in nearly any industry, from home contractors to florists, can build subscriptions into their business. Subscription is the key to increasing cash flow, igniting growth and boosting the value of your company.
“If you have a business, or are thinking about starting one, this book will be the best investment you've ever made.”
Bo Burlingham, author of Small Giants and Finish Big
In this 6-minute video, you’ll hear Tien Tzuo talk about how to make a subscription business work:
If you want to delve deeper into this fascinating subject, here is 1-hour video of Tien Tzuo talking in much more detail about what makes subscription businesses work so well, with a singular focus on the direct relationship:
Watch John Warrillow’s 3-minute overview of the subscription model:
Here is Quentin Pain interviewing John Warrillow, author of The Automatic Customer, on the benefits of building a subscription model into any business. John highlights 8 major benefits:
Click the link below the order a free copy of John Warrillow’s book, The Automatic Customer, and read more about what he has to say on this subject:
Please click the links below for a whole range of statistical insights into the world of subscription services.
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