When I first started getting into the concept of subscription models as a customer, my first reaction was that I didn’t like paying a monthly fee to use a service.
Especially since it is sometimes not that clear what I, as a subscriber get out of a monthly subscription as opposed to just buying a software for example.
Today, I am a great advocate of a subscription economy, from subscribing to scooter services, recuring Amazon deliveries and more. Below you can find nice reasons why a subscription model can be immensely beneficial as a customer if set up correctly of course.
Subscription models are convenient
What many subscribers find the most appealing benefit of subscription models is its convenience. This can be the effortless way of how a service is recurringly offered to subscribers, where they simply must subscribe once, or in business jargon “set it and forget it”. This way, subscribers know that the subscription keeps running until they actively cancel the subscription.
In terms of convenience, one great organization which comes to mind is Netflix. They offer streaming services and enable subscribers a super convenient way to watch their favorite TV shows and movies without any e.g., commercials and such in between.
Of course, Netflix’s main benefit lays in their instantaneous service to start watching a movie. But just think of the way this speaks to especially Millenials and Gen Z’s, of which the majority doesn’t even have Cable TV, simply because they rely purely on this convenient way of streaming movies and TV-series.
Site note: The opposite to convenience and the main reason for subscribers to cancel a subscription is because they feel overwhelmed by the offering. Or worse, frustrated because they might not be able to use the service properly and therefore feel that they are wasting their money.
I mean, would you? Which means that when creating a subscription or membership business keep in mind to make the steps and actions you want them to take as easy and linear to follow as possible.
Stu McLaren – Source
A crucial factor impacting convenience is flexibility – how quickly can a subscriber change his subscription package or status. It is typically easy to subscribe to a service or a product offering. The same is immensely appreciated when it comes to canceling a subscription.
Making the unsubscribe button easy to find builds trust between an organization and a subscriber, so it is recommended not to “hide” the unsubscribe button.
Again, Netflix offers such a notable example here. They automatically cancel your subscription if you haven’t used it in the last 12 months.
Predictable costs benefit a subscription customer
The massive benefit of subscribing to a service is the small upfront and ongoing cost, as opposed to buying the service and committing to it for the next month’s/years.
The overall cost from a customer point of view, can however become more expensive over the long run. However, the feature of a subscription with its predictable/recurring cost helps in forecasting how much money a customer needs over the next month/quarter/year which helps customer in their budgeting.
Site note: In a business jargon this overall cost from an organization point of view is referred to as the customer lifetime value (CLV). The customer lifetime value estimates how much the customer is worth for the organization over the entire period of using the service.
One fun example comes from the car company Porsche. They realized that people’s interests have shifted more towards a subscription model where a customer does not want to take care/own of the car (e.g., taking it to the workshop, taking care of its insurance, worrying about roadside assistance).
Instead, their customers want to drive from A to B in a luxury car with the option to change to a different car from time to time, and not have to worry about insurance or roadside assistance options. All of that for a fixed and predictable cost with the option to cancel on a monthly or three-month basis.
This is attracting quite many younger customers who prefer to rent a car on a month-by-month basis which helps the brand reach a demographic which they otherwise wouldn’t have access to at all.
Continuous and recurring value for customers
Good organizations who are following a subscription model, are having a major interest in ensuring that their offered services keep running in a qualitative matter. This means that these organizations will try to offer value to their subscribers throughout their customer journey to ensure that no subscriber leaves the service.
Organizations are for example create more features, or optimize their ease of use, or by for example keep fixing bugs in their existing products or services. Especially since subscribers can click the unsubscribe button at any moment, an organization must focus on consistent quality across their entire offering.
One interesting example can be found by looking at an exterminator service – offering continuous pest control. Sounds like an uncommon type of organization to be in the subscription business. Well, what does an exterminator service do – they take care of any kind of infestations you as a customer might have.
But to be frank, what if don’t even want to have an infestation problem from the start? Which is why I could pay the exterminator service a monthly fee, so they come by on a regular basis and ensure that the environment is treated in a way that no parasites can foster.
One exterminator service who is following this business model is the organization called My Pest Protection, in case you want to have a glimpse and search for a similar service in your area.
Customers benefit from close company relationship
In general, subscription companies care deeply about their existing customers. Of course, their budget is focused heavily on acquiring more customers but in many cases, the focus of a subscription organization lays in retaining a customer. Meaning the organization tries their hardest to make the service great and solve the need of their customer base.
To do that the organization must stay in touch with their existing customer base to verify and test suggested changes. This can take place in many forms here are a couple of examples just to name a few:
- Focus groups
- Using beta testers
- Listening to forum entries
- Interviewing power user (power user could for example be especially interested customers)
This interaction ensures that the offering will consistently deliver value to you as a customer.
Gaming companies are experts on this. One example is the gaming forge Paradox Interactive which developed a strategy game called Stellaris back in 2016. To keep their customers engaged they kept engaging with them and build additional content, fixed thousands of bugs and keep their user based informed by posting on their website about their development.
Last I checked they had around two hundred updates and fixes released. What’s especially interesting is that this game does not even require a subscription – you pay once and have access to it forever. They do however make their income by providing more additional content packs.
Paradox can keep investing into this game because they have an amazing relationship with their current customer base who will gladly purchase the next content pack. Why? Well because their customers know that Paradox has listened to their concerns and wishes and delivers on that.
Better customer service for subscription customers
Customer service, a topic many of us dread once you purchased for example a car and have to bring it back to get it repaired, only to discover that the service quality, the friendliness of the staff and such, has dramatically decreased.
This is not uncommon for transactional services where there is no need for the organization to ensure that the product keeps running after the guarantee or exchange rights have been surpassed.
Well, this is different for a subscription organization, because these organizations depend heavily on retaining their existing customer base. This means they must ensure that you will purchase the service again next month or the year after.
To keep people happy, the organization must ensure that the customer service, as one of the many touchpoints with the organization, is efficient and helpful enough to address potential problems.
Which is of course great for the customer since they issues are being addressed in a helpful and efficient manner. Because many subscription organizations have realized that having bad customer service just makes their customers unhappy and more likely to go for an alternative offer.
Customers benefit from tailored offerings
This point can sometimes be viewed as positive or negative from your customers, so you need to be aware of their reason.
Once a customer has signed up to a subscription service the organization is many cases tracking the customers moves. Meaning that the company tries to understand how customer are using the service and what features need improvements.
This is a good thing since based on these behavioral insights the organization is able to create services directly tailored to the customer, since they understand how their customer base is in reality using the service.
Think of a streaming service like Netflix or a video service like YouTube. Netflix understands a person’s interests by looking at their behavior by analyzing what kind of movies a customer has watched.
Based on this the customer receives suggested movies which are similar to the previously watched movies or series. They can also compare your behavior with other users to make even more conclusions about you.
This is great because that ensure that an organization is adjusting their offering to what you as a customer really need/want.
The other side of this is that customer need to have a high trust in the organization and their security. A lot of customers might feel uncomfortable if a subscription company has years of behavioral data about them. Be aware of this.
Customers benefit from instant access
A decade ago, bigger organizations had to pay a license fee for their software which allowed them to use said software for a few years. This meant that they had to estimate in advance how many licenses they would need over the next years, which quite often resulted in buying either too many or too few licenses because estimating the future is difficult.
Today due to the subscription model you get in general instant access and usually pay for what you need. This means that a major benefit today is that, as a customer, who has once decided to “opt-in” to a subscription you receive quite often immediate access to the service or the product.
Of course, this varies from subscription business to subscription business. Receive instant access plays especially well into the mindset of our millennial and Gen Z generation.
It is shown that these generations couldn’t imagine a world where you’d have to wait a day or two, for your Blockbuster movie to arrive at the local Blockbuster store after you requested to rent it.
Subscription customers stay up to date
We’re now coming to one of the best benefits of any kind of subscription model. The fact that once you’re paying for a service regularly you will in almost every scenario receive access to the newest product or service.
As an example, for a subscription box model: once you signed up for a box subscription model where you receive a new pair of socks for example every month, you will get a newer and more up-to date pair then the once you have currently.
This means you do not have to worry about your versions of for example a software and its capabilities. In the world of software this is a game changer since normally updating a software on a computer can be quite challenging.
Today with the massive shift to software being available through your Browser (think of Google Docs) you will always work with the newest software.
One company which does this well is Adobe and their product lines such as Adobe Photoshop or Adobe XD. These guys have managed to move from an ownership model of their software (I pay to own the Adobe Photoshop software version 2010), to a subscription model with a monthly fee.
The customer must download and install Photoshop on their computer but once installed, Adobe tracks your log in and checks if you are paying the subscription fee.
If you are, then Adobe will send out updates and error fixes regularly, for free since you keep paying the developers to ensure that the software is running perfectly.
Subscription customers can receive loyalty rewards
Receiving a reward or a coupon code for staying loyal is a great benefit for a customer. This usually happens when an organization wants to give back by handing out small tokens of their love such as a 10$ coupon code. From a customer perspective this is great because you’d have anyway paid for the service but because of your long-term commitment and loyalty to the organization, you receive extra benefits.
This is a wonderful way to encourage customers to stay true to a brand, and it doesn’t always have to be a cash award it can be anything from free resources such as books over to a simple Starbucks coupon. One type of organization which does this incredibly well are airline companies, specifically their Mileage programs.
These guys might not change you a monthly fee but if you’ve signed up and are flying frequently you will quite likely start counting the milage points which you get for flying. These points can be exchanged for items or used to reduce the cost of a flight.
Sometimes organizations bump you up a class, if you are enrolled in their loyalty program and sometimes, they give you free vouchers for amenities such as coffee or inflight-WIFI. So, it can be quite convenient to sign up to a frequent flyer program.