The practice of business development is becoming progressively more creative. Perhaps prompted by the unfettered expansion of the digital world, entrepreneurs are not only seeing more types of business models than ever before; they are thinking differently about what a business model can look like.
Gone are the days of this is how it’s done. Even models that withstand the test of time--such as the subscription model--are being rewired to appeal to today’s exacting consumer.
And it’s working.
What Is A Subscription Model?
A subscription business model charges consumers a recurring fee—usually monthly or yearly—to access a product or service. The most obvious advantage here is predictable recurring revenue. However, there are other advantages inherent to the subscription model for both the business and the consumer, and we’ll discuss them below.
This is by no means a new concept. We’ve been paying monthly subscriptions for our cable TV, cellphones, and even newspapers for years. These familiar subscription types, however, tend to pour heart and soul into building a product--and emphasizing how stellar it is--instead of adopting a methodology more easily digested by the modern buyer--the consumer focus.
Subscription Models: The Business Perspective
Not long ago, mention of a subscription service might have only called to mind digital assets like music, video, or software that can be easily replicated and distributed. Now, the landscape has changed. From razor blades to Porsches, if you want it, you can probably get it on a subscription.
The modern subscription model puts the customer, not the provider, at the center of attention. This inspires customer loyalty, which means brands can stop pelting people with marketing strategies to get them hooked on a one time purchase.
The result? Less time spent on expensive one-off campaigns, and more time building a legacy brand--with a continuous stream of revenue, to boot!
Subscription Models: The Customer Perspective
Brands are not the only ones poised to profit from the modern subscription model; consumers also stand to benefit. Here’s how:
- Convenience: Subscription models are a fantastic fit for those “set it and forget it” items--basically, anything non-perishable that needs to be purchased regularly. Everything from hair dye to razor blades and dog food to supplements can now arrive at your door with zero hassle or effort.
- Continued Improvements and Upgrades: Subscription offerings put companies in a long-term relationship with you. That being the case, as with any long-term partner, they are compelled to keep things ~spicy~.
In a business context, this might mean consistent auto-updates and introduction of new features, content, and value-adds. Think of Netflix and Hulu constantly rolling out new content. Subscription businesses are motivated to make it very easy for you to stay.
- Flexibility: If there’s one thing we know about the modern consumer, it’s that she doesn’t like to be tied down. Fortunately, most subscriptions are perfect for commitment-phobes. Modern businesses considering a subscription component saw the horrendous customer experience being suffered by anyone with a cable TV subscription and snatched up the opportunity to improve upon it.
Don’t like the service? No problem. Modern-day subscriptions that actually respect a customer’s autonomy don’t require cripplingly strict contracts, so you can cancel anytime and take your money elsewhere.
- Focused Spending: Turns out the Stones were wrong; you can (pretty much) always get what you want. Instead of charging you up the wazoo for the one thing you want, along with a bunch of crap you don’t, the subscription model capitalizes on the trend of complete customization: everything you want, nothing you don’t.
Case in point: AppleTV lets you subscribe only to channels you like. Sports lover? There’s a single-channel subscription for that. Trying to keep up with the Roys? (You best believe we are.) There’s a single-channel subscription for that.
Now that you know the general advantages of the subscription approach let’s take a look at some of the companies that are doing it right.
Products that Work With Subscription Models
The variety of subscriptions available out there abound, and the number of business sectors in which they’re applied seems to multiply every day. Here are a few companies that have nailed the formula in their industry:
Dollar Shave Club is one of the most popular subscription-based services, period. At its inception, DSC promised to deliver high-quality razors, right to your door, for as little as $1 a month. Since then, they’ve expanded their offerings to include post-shave goods, deodorant and cleansing wipes, shower products, oral care, and even fully customized kits. You can still get five stainless steel, 2-blade cartridges for just $4 a month.
The brand went viral when they first entered the market with a unique promotion, and their notoriety has only grown since, allowing them space (and capital) to introduce these new product lines and enhanced customer options.
Considering the surprisingly aggressive methods by which many of us have managed to fit 36 hours of activity into one day, it’s no surprise that personal styling and shopping services have started emerging. Ain’t nobody got time to decide what to wear!
Brands like Stitch Fix combine eCommerce with the in-store experience of personal styling and retail shopping. First, customers fill out a fashion and lifestyle questionnaire upon sign-up. Then each month, Stitch Fix sends professionally handpicked items that correlate to those preferences.
Customers can try on the merchandise, keep whatever fits the best, and return the rest. Feedback is then sent directly to the stylist, who can further tailor his or her choices for that customer in the future.
Perhaps one of the first most heavily (and quickly) popularized subscription services is meal kit delivery. From the young NYC professional sick of takeout to the father-daughter duo looking for a bonding activity, it’s abundantly clear that many of us want a little jumpstart in the kitchen.
Companies like Hello Fresh make this super attainable because they remove all the hassle from meal preparation. No grocery shopping, no recipe hunting, no meticulous measuring; simply sign up for one of their custom plans and have all you need for the week ahead, delivered straight to your door. They even make it easy to skip weeks, swap out recipes, or cancel whenever you want.
This is a perfect example of a customer-focused product. The service runs on your preferences and your schedule, no questions asked.
Speaking of meal prep, what about our furry friends? There are several options--particularly in the canine realm--for pet parents who want to feed their animals the best of the best. One such service, Nom Nom, has even expanded to serve our feline overlords as well.
Nom Nom is a “real food solution” that gives you the ability to customize your plan based on the size, weight, activity level, and recipe preferences of your pet. As part of their mission to minimize food waste, they offer discounts for less frequent deliveries, encouraging pet parents to take what they need and use what they take! Multi-pet discounts are available as well.
You can even skip deliveries, if needed, once again demonstrating that flexibility and customer autonomy is a critical component to a successful subscription model.
Although not for the faint of wallet, travel clubs like Inspirato are catching air in the subscription market. Inspirato Pass gives you endless travel...with no nightly rates, taxes, or fees.
So long as you are paying your monthly dues, you can take as many trips as you want, and Inspirato (well, your membership) covers the cost of luxurious accommodations and many recreational activities (see their Experiences). What’s more, you’ll enjoy dedicated trip planning from Inspirato’s expert advisors, special partner discounts, and first-class onsite service, wherever you choose to go.
Inspirato is an excellent example of a crossroads between two popular consumer trends: subscription models and experiential purchases.
KiwiCo has made it their mission to instill and encourage creative confidence in children. Starting at $24.95 per month, they provide carefully engineered project kits that vary by age and interest.
KiwiCo does a great job capitalizing on the customization and flexibility aspects of the subscription model. First, you choose your crate based on your kiddo’s age and interests (science and tinkering, art and design, etc.).
Then choose your delivery frequency. KiwiCo offers four subscriptions, which progressively decrease in price respective to the number of months to which you’re willing to commit. Their month-to-month plan is the most expensive, at $29.95 per month. Shipping is free on all subscriptions (a perk that most consumers have come to expect as a given, especially in the subscription model), and you can cancel anytime. Talk about easy!
It’s clear that subscription business models are beneficial for both company and customer. Products and services should be accessible and high-quality, but today’s discerning consumer demands options, freedom, and attention.
Businesses that obsess over product and forget to focus on people will do well to reconsider their approach before pivoting to a subscription model. Master the art of wooing your customers, consider what bells and whistles will add variety (and value!) to the relationship, and build a user-friendly interface--you’ll be a match made in heaven.