On this episode of Dear Strategy, we analyze the practice of turning almost everything into a subscription! We’ll talk about when this model works, when it doesn’t, and what the future looks like if companies keep trying to move their customers in this direction.
Growing up in the 80’s and 90’s, when someone spoke of “subscriptions,” they were pretty much referring to magazines or newspapers. Or at least that’s the way it seemed at the time. I can remember signing up for my very first subscription – it was Ranger Rick Magazine, and I believe it’s still being published to this day! In any event, the whole process seemed pretty simple back then – you signed up for a subscription, you got your magazines every month, and 11 months later, you got a letter in the mail asking you (yes, actually asking you) if you wanted to sign up for another year. By the time I was 20, I had maybe 5 different subscriptions, and life seemed pretty easy for everyone involved. And, more importantly, everyone seemed to benefit in equal parts.
Fast forward to 2020 where everything is online, everything is automated, and everything is supposed to be oh so much easier to manage. But, of course, with that promise, the reality is exactly the opposite – which brings us to the point of this post.
At last count, I am currently managing no less than 40 different subscriptions (none of which, by the way, are magazines or newspapers). I say “no less than” because I’m pretty sure that there’s one or two subscriptions that I’m forgetting about. And I say “managing” because the work of tracking all those subscriptions has been placed directly on my shoulders – and on the shoulders of all the millions of other subscribers who are just like me.
So how exactly did all of this get so out of hand?
The short answer, of course, is that companies like to have predictable and recurring revenue streams that they can rely upon. This helps them to manage their costs and cash flow without having to worry about exactly where and when their next sale is going to come from. In return for that steady stream of revenue, companies should be able to provide consumers with value-added services that make their lives a little bit happier and a little bit easier. I have absolutely no problem with any of that, by the way.
Where things start to come apart is when companies want that steady revenue stream, and, to get it, they start holding their customers hostage to subscription models that simply don’t make sense for the products or services that they are providing. Let’s take an example…
To those regular readers of this blog, you know that I do a bit of amateur recording and composing on the side. It’s enough to call it a hobby, but not quite enough for me to be making any sort of a serious living at it. Well, there’s at least one piece of recording software that I really like to use. And, because I am considered, more or less, a music “hobbyist,” I probably use that piece of software a few times a year at best – which means that I probably ended up upgrading that software on an as-needed basis at best. One day, this particular company decided that they wanted to move 100% to a subscription-based model. So, now I would be forced to pay on at least an annual basis to maintain a piece of software that I just don’t use that often. Of course, with this new model, all previous versions of the software will eventually be rendered obsolete, which also means that all my previous files will eventually become inaccessible unless I succumb to the new subscription model. So now I’m stuck.
Now, if I do all the math, the cost of an annual subscription isn’t that much more expensive than what I would have been paying to upgrade the software every year. So it’s not that the pricing model is completely unfair. The problem is, I wasn’t upgrading the software every year – mostly because I didn’t need to; and also because the company wasn’t adding enough value in their upgrades for me to justify the price. And that was exactly the problem I’m sure they were trying to solve for – I wasn’t upgrading every year, so they forced me into a model that would essentially require me to. Of course, the problem they should have been solving for is how to build more value into their product so that I would actually want to pay for an upgrade every year. But that would have been the more difficult route to take, so they seem to have chosen this one instead.
The second issue I have with this growing trend of turning everything into a subscription has to do with the way many subscriptions are being managed – or, should I say, not being managed at all. There are a handful of companies that make it as difficult as possible to track your subscription, cancel your subscription, or even remember that you had a subscription in the first place! Believe me, as consumers, we know all the tricks – renewing our annual subscriptions without warning, making it as difficult as possible to view our current subscription or billing information, or even forcing us to send an email to cancel a subscription rather than simply giving us a button that will allow us to do it ourselves. Having 40 subscriptions is bad enough, but asking me to keep track of all that myself could just be the straw that breaks the proverbial camel’s back.
So what’s the natural response to all this? Well, some of you are bound to take the position that I should probably sign up for less things! And some of you would probably be right! But, regardless of how I positioned it, this really isn’t about solving for one person’s dilemma. Instead, it’s about too many companies jumping on a bandwagon that is sure to give their customers “subscription fatigue.” Eventually, the cost of all these subscriptions and the time required to manage them is sure to outpace the value that is being delivered. And that’s usually when everything starts to fall apart.
A great example of this can be seen in the ever-growing “streaming wars.” Netflix was, at one time, a great alternative to cable. I could go to one app and watch pretty much whatever I wanted, whenever I wanted to, and all for one monthly price. Then, of course, more companies wanted to jump on that same bandwagon – and then more, and more, and more, and more… Now, it seems that everyone wants to have their own streaming service. So instead of going to one place for content, I have to go to ten. And instead of paying for one subscription… well, you get the idea. It’s a typical copycat strategy that almost never takes the actual customers into account, and that almost always leaves an industry ripe for disruption. That’s why I have such a problem with so many companies jumping on the subscription bandwagon – because true customer value is oftentimes being overlooked in the process.
So if you’re a product or business leader who’s looking to jump on the subscription bandwagon, just be sure that you’re taking your customer’s actual needs into account. If a subscription model is truly a win-win, then, by all means, go for it. But if you want to adopt a subscription model solely because it seems like a nice steady way to get a recurring stream of revenue, you’re probably going down a very slippery slope. And at the end of that slope, you’re likely to find a pool of soaking wet competitors who all decided to do the very same thing.
Listen to the podcast episode
Dear Strategy: Episode 123
Are you interested in strategy workshops for your product managers or business leaders? If so, please be sure to visit Strategy Generation Company by clicking the link below:
Bob Caporale is the founder of Strategy Generation Company, the author of Creative Strategy Generation and the host of the Dear Strategy podcast. You can learn more about his work by visiting bobcaporale.com.