Subscription-based models appear to be disrupting businesses everywhere, including many of our clients at Pragmatic.
A recent Forbes article referenced this new “Subscription Economy” as a way to have greater flexibility, enabling “adoptability to either pay as they go, or pay per subscription monthly, or via a long-term contract.”
Forbes went on to state that, over the last four years, this subscription model has grown 9x faster in sales versus those in the S&P 500, and 4x faster than those in retail, including e-commerce.
With that in mind, it is critical for marketing and customer experience teams, across both B2C and B2B businesses, to understand how these subscription-based models are changing the definitions of the customer journey. As a thought-starter, here are three common pitfalls we’ve outlined to help our clients think through their customer strategy and communications roadmap:
1. It’s not just happening in technology
The most common misconception we hear is: “We don’t need to think about it for our business.” In reality, subscription-based models are much more common than meets the eye, and are no longer popping up just in conventional areas like SaaS (software-as-a-service), insurance, or on-demand movies.
Mobile technology platforms have given rise to subscription-based business models in every facet of our daily lives, from grocery shopping (e.g. Blue Apron) to getting Legos for your kids (e.g. Brick Loot)
In fact, name virtually any iconic brand name of our times, and chances are they are operating some form of a “Subscription Economy” business. From Amazon (Prime, AWS) to Apple (AppleCare, One-to-one), Microsoft (Xbox Live) to Google (Express, Storage)
Examples are equally prevalent for B2B businesses. Beyond monthly flower arrangement deliveries and copier rentals, subscription-based services are available on everything from professional bookkeeping (e.g. Bench, Harvest) to truck drivers for your fleet (e.g. Ryder Driver Services)
2. A subscription-based customer journey map is fundamentally different
Consider the experience of Gillett, which itself pioneered the recurring purchase model with razor blades. Gillett’s customer journey has primarily been centered on a wholesaler-driven model with largely distribution-centric touchpoints.
The entrance of “Subscription Economy” competitor, Unilver’s Dollar Shave Club, has now fundamentally upended this status quo by establishing a direct-to-consumer relationship anchored on recurring shipments.
As Gillett responds in kind by developing its own Shave Club to compete, it must now quickly develop a whole new approach to the customer journey, tackling critical issues such as new customer onboarding, at-risk user modeling, subscription management and retention best practices.
3. Subscription does not mean “set-it-and-forget-it”
A third common misconception about the subscription-based customer journey is that once a user has gone inactive, any attempt to “wake them up” will inevitably drive them to cancel. The health club industry, where I had first-hand operating experience, is among those industries where conventional wisdom would suggest a “set-it-and-forget-it” attitude to customer engagement.
In fact, lack of proactive customer engagement is detrimental to the growth of sustainable, mutually beneficial customer relationships. Customers do not go dormant simply because they are forgetful or apathetic. Back to the example of gym memberships, gym members are, in fact, quite aware of what they are paying, and getting them “off the couch” is ultimately the best retention strategy for a health club. Often, members may still keep their subscription as long as they retain the expectation of returning (someday).
And a gym would be well-served to proactively reinforcing the value of keeping those hopes alive, directing its incentives back to supporting its core values of encouraging members to stay healthy and come back. These same lessons are equally applicable across other businesses, from software-as-a-service to insurance and healthcare.
At Pragmatic, we have helped Fortune 500 and growth oriented companies alike develop actionable strategies that take into consideration the impact of the “Subscription Economy” on their customer journeys, and would love to help yours do the same.