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Pandemic times: the subscription business model is looking good

  APRIL 2020

 5 MIN. READ

TOPIC

DISRUPTION

1 The Business Of Continuity

01Subscription selling is coming to all sorts of business models

And pandemic times are accelerating the opportunities. With more companies selling their products “as a service” and a coronavirus pandemic that it’s forcing millions of customers to try new buying methods, the subscription economy proposes a new kind of sustainability for your profits, if you can master it’s challenges.

Source: Zuora — BusinessWire

Players 

Besides typical examples of Netflix and Spotify new players are enlarging the list: from a subscription-only model like Trunk Club and Blue Apron to other manufacturing and business sectors.

Airlines, tech companies and even guitar manufacturers can take advantage of the model. Get inspired and check out some smart players below.

Watch 

YTWhy everything is a subscription

by The Verge

2 A Pandemic Need, A Big Opportunity

02Movement restrictions pushes ecommerce

Stay at home control measures are making customers -even the less adventurous- to rely more on online buying, which has led to a growth of ecommerce and particularly of Direct-To-Consumer brands which can offer them customised offers in these uncertain times.

Quote 

“Services remain an underdeveloped area of the subscription economy.”

Chris George, co-founder and Chairman of SUBTA

3 How to do it

03How to Start

To begin, think not only about moving your product or service into the subscription logic, but also about the added services you can provide in recurrent form: maybe the subscription is about your product maintenance or upgrade..

We sell outcomes, not products

It’s not about the things, it’s about the actual solution the customer is looking on the product. It wasn’t about vinyls, it was about listening to great songs; it’s not about cars, it’s about getting from A to B in the best possible way

Key 

The key drivers for subscription are convenience and the added benefit of exclusive access to products

Must read 

BKThe membership economy

by Robbie Kellman Baxter
Check on Amazon →

Must read 

BKSuscribed

by Tzien Tzuo
Check on Amazon →

04The Keys

Usage-based pricing helps lower the churn and increases overall subscriptions: the balance and flexibility of usage options plays an important role in customer engagement and retention

DTC Benefits

Direct to Consumer brands have the benefit of collecting user data to offer tailored packages and adjust offers and prices to adapt to changing markets. Also, they enjoy a regular and more predictable income and better inventory control.

Why it works 

Retail can work with it

In the future, the new normal could involve traditional retailers using subscription formats to get people into stores. One example could be a suits box giving you coupons and recommendations to go to the store and get matching shoes.

Watch 

YTSubscription Business Models – 6 Types You Should Know

by Uscreen

04The Keys

Usage-based pricing helps lower the churn and increases overall subscriptions: the balance and flexibility of usage options plays an important role in customer engagement and retention

DTC Benefits

Direct to Consumer brands have the benefit of collecting user data to offer tailored packages and adjust offers and prices to adapt to changing markets. Also, they enjoy a regular and more predictable income and better inventory control.

4 Why it will grow

Black Swans 

05Global Events

Pandemics, shortages due to local conflicts, logistics crisis and global warming are risks in our future that can push the need for online buying even further; and those needs are going to be fulfilled by smart players sourcing globally with a strong structure.

New Markets 

06Platforms & Logistics

More platforms mean more network effects: finding everything in one place will make it easier to try subscription for more things. And last-mile logistics are only getting better: we may expect drones and more platforms to fill the gap between big distribution centers and our homes.

New Habits 

07Aging + A Subscription Life

Increasing life span will make more people need more solutions in an easier way and delivered to them. And according to some futurologists, the concept of ownership will no longer exist in the world of tomorrow.

5 The Challenges

08A tough ride

Getting a successful subscription business off the ground is a journey marked by some particular challenges to keep alive a long-lasting relationship with your customer

8AChurn

Getting the users through offers and marketing spending can be the easy part: maintaining interest in your product is the difficult task. Consumers decide fast to cancel services they don`t like and they rarely come back

8BRetention efforts

So, the logic goes: don’t spend everything on acquisition and focus heavily on retention. The customers you have also give key feedback and data and are cheaper to keep that getting new ones. And if you play your cards right, referals could be on the table.

8CIs it ethical?

‘Forever transaction’ business models can be seen problematic in the light of subscription fatigue: a lot of business are offering subscriptions when they shouldn`t, like for products you use one time or giving a lot of stuff you don’t need. It’s on you to create a trustworthy, valuable model that deserves customers.

8DThe developing economies challenge

Where credit card penetration is low, ecommerce is not completely trusted and delivery infrastructure is not fully reliable, underdevelop markets can prove extra challenging. Do a thorough research on it’s limitations and your target segment before proceeding.

6 The Players

09Inspiring business

Here are some must-know names and inspiration in the subscription field

Organization

Subscription Trade Association (SUBTA)

Connect

Subta.com

The Subscription Trade Association is the leader organization: based in the USA, it gathers subscription boxes companies, media and streaming, memberships companies, SaaS and digital. They organize the SubSummit event every year.

Company

Zuora

Connect

Zuora.com

It’s the the leading cloud-based subscription management platform provider, offering services for payments and customer management. They also have a lot of resources for subscription business in many industries. Their CEO is Tien Tzuo, a former Salesforce veteran.

Organizations

Traditional go DTC

Companies in more traditional spaces like Nespresso, Grab, Flux and GoCar are also going into subscription offers. Grab in Southeast asia has plans for receiving tea, while the famous coffee maker is offering it’s capsules at home on a monthly-basis.

Even Delta Airlines is selling priority boarding for an annual free, indirectly allowing them passengers to early access to the overhead bins.

Company

Fender

Connect

Fender.com/Play

The classic guitar maker realised that 50% of it’s sales were coming from new customers, of which 90% gave up learning to play after a few months. So they decided to invest in an online learning platform, the Fender Play app, where users pay a fee to master it’s new instrument while developing more love for the brand.