The subscription model is no stranger to consumers; originally home to industries such as publishers and gyms, we’ve known about it for a long time. Recently, new technology has made 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. Subscriptions are on the rise and it doesn’t look like they’ll be slowing down anytime soon.

Today the model is being modified and adopted by a much wider market, from music (Spotify) to television & film (Netflix and Amazon Prime), and now food and coffee (HelloFresh & Pact). These businesses have started to recognise the benefits gained from the subscription model; the ability to predict revenue through recurring sales and also gain further insight into what their consumers really want. 

To give an example, Spotify has embraced the subscription model and changed the way music is consumed; for a flat monthly fee it enables people to listen to a vast selection of ad-free music whenever and wherever they like, with the click of a mouse. On top of this, using the latest technology, there’s the added personalisation of Spotify’s Discover Weekly playlist based on a customer’s listening history and that of other Spotify fans with similar tastes, which takes tailor-made content to a whole new level of meaning. 

Also, technology has enabled global online retailer, Amazon, to retrofit subscriptions to existing customer choices. Its service Subscribe & Save encourages customers to place recurring monthly orders for products and in return receive up to 15% off – removing the hassle from shopping with a special deal incentive. 

Consumers want subscription models

According to The Economist Intelligence Unit from 2014, 80% of customers are looking for different ways to acquire goods and services whether it be through a subscription, leasing, renting or sharing service. This has resulted in consumers increasingly warming to subscription relationships across a range of different industries. 

The biggest driver has been millennials not placing value on owning a product or service, but having the ability to have access to it whenever they want. For example, why buy a car when you live in central London when you can rent one for a fraction of the price? It is human nature to choose the easiest possible route, and it’s this ‘convenience’ aspect of subscription models that is really helping to drive its popularity among consumers.

Subscription model golden rules

Before jumping on the subscription model bandwagon brands must first identify their most valuable audience to focus their attention on and build even more profitable relationships with. It’s about finding the right person for the product. For example, the Close Shave Society shouldn’t be addressing members of the British Beard Club.   

The most effective marketing strategy when creating a subscription model is to incorporate feedback into the service. When customers sign up to Graze they are asked a series of questions in order for the company to ensure it sends them food they will enjoy. This review aspect is encouraged after each order is received, which their customers are willing to do because they realise it will provide them with a more personalised service. The more you match the needs of the customer the more likely you are to make a sale.

Following on from this sharing information with consumers is key to creating a good subscription model and driving sales. For example, beauty brand GlossyBox includes product descriptions and a questionnaire with its box of cosmetics. These descriptions offer customers insight into the latest beauty tips, trends and styles, whilst the feedback from the questionnaire is used to tailor future packages for the customer.

Word of mouth has always been one of the most effective marketing tools and a great way to get your customers talking about you is to nurture them via 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. A recent article by Business Zone stated incentivised referrals can increase customer acquisition by up to 20% and see up to a 25% higher average order value.
The subscription model really comes into its own when a customer decides to cancel their subscription, because they first have to open a communication channel, which offers companies the opportunity to persuade them to remain.

The future

Subscription models are evolving quickly as technology also advances. Therefore they are able to move outside of the generic publishing marketplace and into markets that had never before considered the model as an option.

The growth of the internet of things world is spurring this evolution and as a result we can expect to see an increasing number of industry sectors start to embrace this model. For example, your Phillips washing machine could have a subscription arrangement with Lenor fabric softener. 

Remember, the key to creating a successful subscription service is building real relationships with real people through ongoing communication and customised promotions based on your knowledge of customers.