Shopping used to be the only way to get something. You would stop by the grocery store to look for and buy what you needed, pay for it, and then you would have it. You could stop by a magazine stand on the street to get the latest edition of your magazine of choice, pay for it, then take it with you. Remember when cash used to be the primary method for exchanging payment for goods? Shopping is usually how we obtain items that we only need one of, or maybe in a series of one-time purchases, like buying a new computer or pair of socks. But, this is not the only way to get what we need anymore.
From Tangible to Digital
The exchange of money for goods used to be primarily for tangible goods. Sometimes they were physical and digital items, like purchasing a boxed Microsoft Office Suite with CDs that you’d install on your computer. As the business and consumer worlds became more digital, there was even a brief period where we could pay for virtual and digital goods, like when Facebook sold “virtual gifts” such as an image of a cupcake you could send to someone on their birthday circa 2007 and iTunes music tracks that are your digital files to keep once you purchase them. Mobile apps still fall in the shopping category with this thought process as a one-time-buy.
Value Beyond a One-Time Purchase
Now, more than ever, there are subscription-based products that allow you to continue to receive value beyond one purchase, like with a magazine subscription. You still get a physical good in exchange for money, but you might pay for the annual subscription up front for a series of magazines, or in some cases, monthly. Subscription-based business models mean you no longer have to pay for just one item at a time, and possibly an even more valuable result is that you don’t have to go get them. They will come to you (like in the mail or on an electronic device). Now, you can even pay for digital magazine subscriptions and software subscriptions like Microsoft Office and Adobe Creative Cloud subscription, which you can no longer buy as a tangible product as of this year. Subscription pricing models even provide access to do things like manage expenses and taxes through Quickbooks tax software, for example, or for online dating, which crosses into the services category.
Related Resources from B2C
» Free Webcast: Blogging in the Age of Modern Marketers
Subscription Products vs. Subscription Services
Lately, I’ve been paying attention to the rise of the subscription-based pricing model. Maybe a light bulb went off when I gave in and paid for a premium Spotify subscription and then heard about how my fashionable coworker is a member of JustFab.com (a shoe subscription, of all things!) There are clear pros for businesses to use a subscription-based model, like reducing the cost of inventory, and recurring revenue streams. But, with the rise of subscription services, I’ve come to appreciate this business model as a consumer with a marketer’s hat on. So, let’s put subscription programs into two categories:
- Subscription product programs that enable you to get things on a recurring basis that are yours to keep in exchange for payment or a series of payments.
- Subscription services that provide access to goods and services that discontinues when you stop paying.
Keep these two subscription types in mind as you explore my de-constructed love letter to subscription-based business models, if you will. I also surveyed family members, friends, and coworkers and found out we’re all subscribers. Here are the reasons we, as consumers, love subscription programs:
- When you set up an account, you can enter your credit card information to be accessed for all future purchases or fees, without having to re-enter it.
- You don’t have to remember to pay monthly, whether you pay a larger amount up front or recurringly – auto-pay is all about convenience and you can often opt to receive electronic receipts when a payment is made automatically.
- There is very little required for you to actually get what you’re paying for in your possession. If it’s music, once you download Spotify to your device or devices (computer, smartphone, tablet), you can select and save the music you like to listen to whenever you want and a premium subscription allows you to access the music you’ve already selected across devices. Convenient? Yes! If you’re a member of JustFab.com, the shoes will ship to you.
- Access versus Ownership
- We live in an I-want-it-now world. Sometimes, we don’t need hundreds of music files taking up space on our computers (i.e. purchased from iTunes), we just need access to listen to what we want when we want it. In fact, Apple just announced they are releasing iTunes radio, more towards a subscription-based model and they already have an iTunes Match subscription option to share all purchased music across devices which can be stored in iCloud to save space.
- When we pay for access to software like the Adobe Creative Suite mentioned above, we only get access as we pay for and use the service. Sometimes that’s all we need, instead of CDs that will sit in a cabinet after installing them on a computer.
- Manageable Costs
- Sometimes smaller, frequent payments make purchases more manageable, on the wallet and in the mind. Of course, you may have the option to pay up front for several months at a time, which could save you in the long-run. Services like Chicago-based Klutch Club offers health and wellness product boxes to monthly subscribers for $8/month + $8 shipping/month for the yearly option for women, while it costs $9/month + $8 shipping for the same 3-month subscription. According to Klutch Club member, Jenny, “Canceling is so easy. I didn’t realize recently that I signed up for a subscription and with just a phone call was able to change it no problem!”
- Surprise, Discovery, Flexibility
- Some services allow you to choose the products you’ll receive like on JustFab.com. Think of it as a credit and you get to choose your next pair of shoes.
- Others send you a surprise to discover and try new products you may not have found on your own or had access to. Klutch Club member Jenny also shared, “I sometimes get products that I don’t have much of a use for. That said, sometimes I get products I never knew could actually be useful so it goes both ways.”
- Beauty and lifestyle subscription service, Birchbox, subscriber Karie, says “It’s always fun to get one in the mail, and I’ve gotten a lot of use out of things like sunscreens, lip balms and travel size makeup.” Hayley Barna, co-founder and co-CEO of Birchbox shared, “We also sample and sell many exclusive and hard to find products from niche brands and international brands.”
- Unlimited Use & Long Term Needs
- Subscription services like Spotify, as mentioned, allow for unlimited use of the app to listen to music whenever you want. If you know you’ll always like listening to music, becoming a subscriber is a no-brainer since you will likely use the service long-term.
- I discovered Amazon member service, Amazon Mom, through my sister Julie, offering three free months, then paid subscriptions to set a scheduled delivery date and order any family essentials products and diapers with 20% savings. Amazon Prime includes one free month, then for $79/year, members receive free two-day shipping on any products and movies and TV streaming and access to one free book a month from the Kindle library. If you’re a Mom (or parent) who’s constantly buying diapers and family products or a movie buff, subscribing is more convenient than running to the store a few times/week. These options appeal to long-term needs. According to Amazon Prime subscriber George, “I have two kids (ages 4 and 2). Getting to the store with them and actually getting anything done there can be extremely difficult. I love using Amazon prime on my iPhone. When I remember I need something, I just purchase it quickly and I’m done. The 2-day standard shipping is awesome!”
- Demonstrate Brand Loyalty
- Before Spotify launched, I used to buy songs on iTunes. Why? Well for one, that was the legal way to obtain music I wanted. But two, I wasn’t proclaiming my brand loyalty to iTunes with a purchase, I was proclaiming my loyalty to the artists I was supporting. Now, I’m demonstrating my loyalty for the artists I support (because I know artists are getting royalties when I listen – yes, that was the case with iTunes as well), and Spotify provides an easy listening service for me that I can access on multiple devices anywhere so I’m more than willing to show my loyalty for the service and brand itself through the small, recurring subscription payment.
- When we pay even a minimal amount per month for a subscription to a product program or service, we’re asserting our loyalty to the company since we’re comfortable paying long-term. We know we’ll get a reliable service and we’re not afraid (in fact, the opposite) to securely share our payment info for the benefits of convenience and value.
So, we talked about why subscription-based business models are consumer-friendly. Here’s how to choose a subscription that’s right for you:
- Ads vs. no ads - Many online services offer free options if you have tolerance for viewing advertising. If it interrupts your access or you’re not a fan of ads, you may want to pay for options that remove them.
- Usage - Review subscription options and determine how much you plan to use the service and for how long. Consider the cost savings for long-term subscriptions or extensive use.
- Budget & Buying – Weigh whether it is worth it for you to pay more now, up front, or over time if you have the option.
- Ask Around – Ask friends, family, and coworkers if they subscribe to a service you’re considering. They may have advice or an experience to share that may shape your decision to subscribe, which option to choose, and an optimal membership duration.
- Try it Out - If you’re not ready to be brand-loyal and want to try a subscription service, review the cancellation policies and costs associated, then pick an option to try. Once you’ve received a product or gained access to a service, modify preferences if needed.
What consumer subscription programs do you belong to that I haven’t mentioned and what do you like about them?