Subscribing to regular supplies of products can offer the ultimate in convenience for consumers, and a secure revenue stream for business. It sits perfectly with goods that are constantly used, and also ones where the consumer does not feel the need to shop around. There are challenges with the model as it needs to be flexible, engender trust, provide value for money and be accurate – consumers do not want to pay for more than they need.
Disrupting the status quo
There are also good opportunities to use the model to disrupt a category by offering low-price versions – such as Dollar Shave Club has done with razors.
On the other hand, we have seen Starbucks embrace the subscription model as a way of premiumising its brand and enabling it to embrace third-wave coffee – high quality coffee normally associated with independent cafés.
Is it a viable long-term model?
With pros for consumers and brands alike it’s easy to see offering a subscription to regular supplies as something of a win-win. However it poses many challenges:
- Striking the balance with the amount of the product the consumer is expected to use – consumers do not want to end up with surplus every month, whilst retailers and manufacturers may be tempted to sell as much as possible.
- Offering value for money – by signing up and giving away their data, consumers expect a bargain or at the very least, not to discover they could save money by not subscribing. Careful thought is needed to ensure the consumer does not miss out on special offers such as buy one get one free, which might regularly mean the subscription consumer is paying more.
- Flexibility – again a difficult balance, but consumers do not want to feel that they are tied in –this can be avoided by making it easy to cancel the service or pause or skip a delivery.
- Trust – consumers are placing a large amount of trust in the business so the relationship with the consumer really matters.
Euromonitor’s new Strategy Briefing: Engage, Return and Repeat: The Subscription Economy explores all aspects of the subscription model. The subscription economy is one of several alternative business models gaining traction across sectors. On the whole, a successful subscription service is just one aspect of a multi-channel offer. For business, the model signifies a new revenue stream, but often above that, a valuable source of data on consumers. For consumers, in its optimum guise, the subscription economy offers value and convenience, fitting with the shift in values and priorities we are seeing today in the New Consumerism.