News & Views

Opinion / Subscription Models Sell

by Contagious Contributor
David Shiell, CEO at House of Kaizen, explains why he believes subscription models will play a vital role in the future of marketing

No longer just the preserve of publishers, the subscription model is emerging in new and unexpected markets, with music (Spotify), film (LoveFilm and Mubi), food (Cure&Simple) and tea (Eteaket), all part of the club. These companies share an understanding of the inherent value in creating a recurring revenue stream as well as helping to cultivate long-term relationships with customers, who are likely to remain patrons in the long-run.

Subscriptions are also a lucrative source of data for brands, due to the pre-existing relationship they’ve built with their customers. Users feel more relaxed about sharing how they feel about your service in order to receive an even more personalised offering. The data is also useful for potential partners, acquirers or advertisers. In fact, constantly improving technology is making it easier to deliver subscription models that use cloud based solutions and data analytics to achieve better learnings and as a result, more accurate targeting, thereby driving upsell.

At the same time consumers are pushing for change. The Economist Intelligence Unit from 2014, reported that 80 percent of customers are demanding new consumption models, including subscribing, sharing, and leasing  – anything except actually buying a product outright. And it’s digitally savvy millennials who are at the forefront of the subscription economy. They value access over ownership, looking to tailor services to fashion themselves an ultra-personalised service.

Convenience is also important with subscription models. Where in the past you might have gone to a local DVD hire shop, now Netflix has consumed this market with a flat monthly fee that allows people to rent DVDs whenever and wherever they like, with the click of a mouse. On top of this there’s the added personalisation of film recommendations based on a customer’s previous choices.

The benefits for brands and customers alike are clear, but how can brands best implement a subscription model?

Acquire and retain

First and foremost, marketers must pick out valuable customer segments, which will help inform their subscription campaigns. This is about quality, so selecting the right person from the crowd is important. Case in point: companies like Close Shave Society (above) shouldn’t be addressing members of the British Beard Club.

A key way to build relationships is by sharing information, and the quality of your communication is as important as the quantity. Take beauty brand GlossyBox (below) for example. In addition to sending a box of cosmetics, it includes product descriptions, which inform customers of the latest beauty tips, trends and styles. Also inside the box are questionnaires, and feedback is used to tailor each package to the customer for future subscriptions.

In terms of customer retention, the subscription model really comes into its own, because if one wants to cancel a subscription they first have to open a communication channel, which presents an opportunity to convince them otherwise.

Personalise and cultivate

The most effective strategists build feedback into their models. Graze enables its customers to respond to a series of questions, which their customers are willing to do because they realise it will provide them with a more personalised service. And the more you match the needs of the customer the more likely you are to make a sale.

Once consumers are engaged and happy they need to be nurtured. Because if they are pleased with your product or service they are more likely to recommend it to friends. This satisfaction can be amplified by a robust social media strategy. Social media is a great platform for subscription marketers to offer incentives for referrals or by moving subscribers from one tier to the next.

The future

Subscription models are constantly evolving and can be implemented across a swathe of industries one wouldn’t associate with subscriptions. In the internet of things world expect subscription relationships to grow. For example, a dishwasher brand and Unilever could create a subscription relationship to enable their brand of dishwasher tablets to be automatically ordered by the dishwasher when stocks become low.

All marketers must remember that the crucial rule behind effective subscription marketing is building real relationships with real people through regular open communication and customised perks.