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The Era of the Subscription Model and its Impact on CX

Steve Berry
08 Aug, 2019

It seems like every service you can imagine has some form of recurring subscription model attached to it now. Meal kits, groceries, film and music streaming, games, software, news, blogs, clothes, shaving, pharma, pet supplies, and...bones...for some reason. So yeah, there's something for pretty much everyone.

Except of course people who'd rather a one-off purchase that doesn't repeatedly charge their credit card — you know, old-school.   

Whether you're for or against it, subscription business models aren't going anywhere. Their growing popularity with companies and consumers has created a new environment for retail and e-commerce to flourish in, and they're not about to give it up. 

So Many Subs, So Little Time

Newspapers and magazines have used monthly or yearly subscription models since the 17th century (which makes it about as old as people who still read newspapers and magazines).

But it wasn't until the perfect storm of e-commerce coupled with next-day home delivery of everything under the sun (read Amazon) that the model really found its stride. The streaming market alone takes in $2.1 billion a month, not counting all the other delivery subscription services out there. 

throwing boxes gif


Venture capital in particular considers subscriptions the gold standard, largely for the inherent consistency of automatic, direct monthly charges. 'Reliable income' is a siren's song for investors; streaming, SaaS, or monthly mystery boxes. Of special note are 'freemium' and trial offers, and the dark patterns therein that threaten to ruin the experience for everyone.  

Streaming

Netflix, Hulu, Twitch, and new arrival Disney+, as well as CBS, AT&T, and Comcast are all competing for viewership. Spotify, Soundcloud, Pandora, and others occupy the music streaming space. 

Upsides:

  1. Direct to Consumer, no need for physical supply chains.
  2. Accessible anywhere with a wifi connection

Downsides:

  1. Slow internet still exists.
  2. Media conglomerates control a disproportionate amount of the entertainment industry, limiting consumer options. 
  3. IP Licensing means you'll have to pay for more than one streaming service to get all the content you want. Entertainment bundles are a possible solution. 

SaaS

Software as a Service includes services like Adobe, MS Office, Slack, Hubspot, and other cloud-based software suites.

Upsides:

  1. Monthly/yearly payment models give devs more freedom to provide value with consistent software updates and support,
  2. Helps consumers get value from the product,
  3. Makes them more willing to pay, which gives devs more freedom — see the loop here?

Downside: No more one-time payments for lifetime access. Alas. 

Monthly Subscription Boxes

Delivery services like BlueApron, Meals on Wheels and niche, curated product selections like MysteryBox, Loot Crate, Candy Club and countless others. Some use the pay-as-you-go model for products bought and used on a regular basis, like Dollar Shave Club or Birchbox.

Upsides: 

  1. Never be without the stuff you use all the time. Low effort.
  2. Forget a grocery run, it's delivered to your door!

Downsides:

  1. Potentially end up with 60 boxes of unused contact lenses from Hubble (true story).
  2. Can be hit-or-miss, especially with mystery products. 
  3. Interesting CX Note: Companies in this vein love to make an experience of the box itself, and the excitement of opening it. The added value from presentation makes for a great shareable moment. 

'Freemium' Services

Free apps with paid benefits, like YouTube, Evernote, and countless other apps and online games.

Upsides:

  1. Free access gives customers a taste of the product, and might incentivize them to upgrade to a membership.
  2. Allows companies to make income from paid adverts. Great for small companies that would otherwise have little income.
  3. Often maintained throughout growth because free access continues to attract new users.

Big Downside: Some of these companies advertise aggressively. Like, airlines-going-out-of-their-way-to-make-economy-so-uncomfortable-that-passengers-will-pay-to-upgrade aggressive (read YouTube). It's called manufactured suffering, and customers hate it.

Also, we simply can't condone this gut-lurching level of bias: 

Image result for youtube survey absolutely great

For more examples of bad surveys, we wrote a whole article about it. 

The Future of Subscription Services

Subscriptions already encompass pretty much every market you can pull off the top of your head, and a lot you can't. But what about where it can go in the future? 

Subscription cars are already in the works. Paying a monthly flat fee to drive whatever car you want from a dealer is a pretty intriguing deal for motor fans. 

blue BMW coupe parked on the road during daytime

The price tag might seem high for some plans ($1,399 for BMW's Legend, $1,595 for Mercedes' Reserve, compared to a modest $600 for Volvo's Care), but that cost includes both insurance and maintenance for the vehicle, so it's less than it sounds like. 

Medtech is on the verge of moving to subscriptions as well. For clients purchasing high-end medical software and equipment, the model provides the same predictable expenditure as a lease, with the added value of "maintenance, labor, clinical or operational services, and product upgrades and replacements". 

However, one thing these models are missing, according to marketing lead for ZS Associates Jay Zhu, is "stronger commercial analytics capabilities to track customer usage, churn and renewals and have processes in place to prevent customers from canceling subscriptions". 

Know your customers - demo worthix today

Like a Frog in Slow-Boiling Water

As one of many who don't keep an eagle-eye on their credit card statement, I know how easy it is for small automated payments to slip quietly into the ether of the monthly paycheck.

Reality check: they add up fast when you have a basketfull of them. 

Image result for frog in boiling water

It's like being a frog in a pot of boiling water. The temperature creeps up in increments so small you barely notice, and you acclimate. Then all of a sudden, the water's boiling and you can't take it anymore — a payment bounces, and that's a real "oh $#^%" moment. 

Tons of people underestimate how much comes out of their accounts monthly. When 2,500 Americans were asked how much they spent on digital services and subscriptions, $79 was the average first assumption. But then they were asked to consider specific services by name, and that list was then expanded to include ISP's, periodicals, meal kits, etc. That number jumped to a $237 monthly average. 

So clearly drowning in subscriptions costs a lot more than you may think. How can you keep from going under without losing track?

The Solution to Tracking your Subscriptions Might be...

...another subscription. Yep. For yet another small monthly fee, you can keep track of all the rest of your small monthly fees. It's come full circle. 

Image result for you're kidding me gif

Automatic subscriptions have become so prevalent that they've created an entirely new market: subscription tracking apps. And there's a swarm of them — Truebill, Trim, Subby, and Bobby to name a few. Some require bank info and some don't, so use discretion.

Not only will they keep tabs on all your recurring charges, most will notify you of any price changes that you might be unaware of. 

Image result for truebill

Most are freemium, with additional paid services. Some intriguing premium features include account syncing, spending and saving advice, spending habit metrics, and a couple can even investigate unfamiliar charges that pop up. 

There's another option for iOS and Android users, though. You can actually manage, edit and cancel your subscriptions through your native App Store or Play Store settings. It's the simplest way to do it, just without all the bells and whistles. 

Ruining the Experience: Dark Patterns

Ever try to cancel a subscription only to get hit with an emotionally twisting message, begging you not to go? Or were you confronted with a CAPTCHA as you tried to hit cancel, and forced to call a service rep who tried to dissuade you from cancelling? How about clicking ads disguised as download buttons, or the old bait-and-switch offer?

ad spam

These are referred to as dark patterns, and they're a common menace to subscription experiences designed to keep you on the hook.

Making a service stupid-easy to get into, but irritatingly hard to leave is affectionately referred to as the 'roach motel'. Coupled with forced continuity (taking a free trial and getting silently billed every week the instant it expires, AKA negative option billing), and you have a perfect pincer attack on your credit card.  

Personally, I'm more likely to resubscribe to a company that makes it easy to leave in the first place. Here's an interesting article on how to win back your customers the right way.

Word to the wise: don't sabotage your own customer experiences by making customers feel like they were cheated out of their money. 

If your customers really want to leave, making it more difficult for them certainly won't make them want to stay. At least ask them why they want out, and try to fix that problem instead of resorting to manipulation. 

Learn the drivers that make customers stay or churn - Demo Worthix

 

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