For businesses, subscriptions offer a consistent source of revenue, as well as an easily accessible database of customers. The likes of Dollar Shave Club and HelloFresh have made it big through subscriptions.
Customers, however, are growing weary of the monthly model. More than half of people are frustrated that their subscriptions are so fragmented. Big-box store Target discontinued its subscription model at the end of 2020 after realizing that its customers preferred same-day delivery on its products.
There's also the cost. Average spending on subscriptions is $273 a month, which is up 15% from 2018 and, naturally, inflation and the rising cost of living are leading people to reassess their outgoings. For businesses, that means either upping the value of their subscriptions, or finding a totally new way to acquire and keep customers.
The product dilemma
In the health-and-wellness space, subscription models have helped brands guarantee tough-to-get repeat purchases. That's why Jamal Ayton-Brown and Jamal Ramsey initially wanted to launch their protein shake brand, BOXD, as a subscription service. ‘We were really focused on having a complete subscription model, and weren't even going to allow people to buy the product ad hoc,’ Ayton-Brown says.
It wasn't long before the pair started to sniff out the rotten bits in the business model. Since they were entering the market as a completely new product, they'd also have to figure out whether it was actually something that customers needed and wanted before scaling up. But the lack of product awareness to start with meant that it was difficult to onboard the initial set of customers. Now BOXD gets enough repeat customers even without the subscription, because the product has a strong functional use case.
While a subscription model can look really good for a brand's metrics – you can confidently use the current number of subscribers to predict how the business will grow, Ayton-Brown says – it's also a lot about psychology. ‘A lot of it is a mental perception thing,’ he says. ‘People just don't want to be tied into a continuous monthly payment.’
Anything but passive
It's also a lot of work. ‘Lots of people go into subscriptions and are undersold just how much maintenance that requires,’ says Aime Cox-Tennant, founder of website design studio Studio Cotton. Aime believes that for any business considering subscriptions, community management is crucial. ‘Someone needs to be around to answer questions and manage expectations,’ she adds – probably all the more vital when the customer isn't getting a tangible and physical product for their monthly fee.
Anthony Collias, CEO and co-founder of carbon offsetting platform Treepoints, which has experimented with subscriptions, doesn't believe that the model is going anywhere anytime soon. However, he thinks that consumers will become more discerning about their subscriptions and whether it's worth a monthly payment. ‘There is definitely a place for subscriptions. What there isn't a place for is brands that rely on people forgetting to cancel their subscription, or those that make it extremely hard to cancel.’
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