Will Subscriptions Work Forever? The Future of a Popular Pricing Tactic

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Photo credit to Adam Fagen

Subscriptions are everywhere. Big companies, small companies, public, private, venture-backed, bootstrapped, and across virtually every industry.

And many are starting to complain of “subscription fatigue”.

They might feel that the subscription pricing isn’t justified by the offer (a Product/Market Fit problem).

Or maybe they feel bad about fact that they aren’t taking advantage of all the great value their subscriptions provide — too many unread New Yorkers, uneaten Blue Apron kits (Subscription Guilt).

Or maybe they’re just angry that it’s so darn hard to find the cancel button.

I am a big fan of subscription pricing. I have dedicated more than twenty years to helping organizations use subscription pricing as a tactic in building deeper, more trusted relationships with their customers. But they’re not for everyone and they aren’t right for every situation.

Increasingly, people are wondering if subscription pricing is here to stay, or just a fad. I was motivated to write this article by these questions and in particular by product strategy guru Gib Biddle, who asked me to weigh in for his Ask Gib PM newsletter on Substack.

Subscriptions are not new — people paying recurring fees in exchange for access to content, commerce and/or community benefits for hundreds of years. What is new is that technology is extending the infrastructure that enables the kind of trusted relationships needed to justify subscription pricing.

With the rise of things like cloud computing, subscription billing, usage analytics and community platforms, it’s never been easier, operationally, to implement subscriptions as part of a business strategy.

Subscriptions support a more customer-centric approach. To be successful with a subscription, an organization needs to focus on delivering ongoing value, that supports a subscriber’s ongoing goals or problem solving-needs. Therefore, in many cases, the subscription offering provides more value. I don’t need to own a car — I need to get to work every day. I don’t need a CD collection — I need access to the music I love.

If you want to incorporate subscription pricing into your business, you need to take a step back and focus on the “forever promise” that your customer wants you to make to them. It’s all about being willing to rethink the bundle of benefits you provide on an ongoing basis, instead of focusing on selling widgets.

Many organizations have found that by taking that step back and rethinking their business in terms of that ongoing impact, by using subscriptions, they are better meeting their customers’ needs. It’s a better model.

Subscriptions aren’t perfect. They are a step in the right direction — an effort to better align the needs of best customers with a solution that more completely solves their problem.

But there are times when you don’t need an ongoing bundle of benefits. Maybe your usage has peaks and valleys, or significant up front investment is required before a subscription makes sense, or you want a subscription service around a product you want to own.

What’s great about subscription pricing is that it recognizes that there is value in an ongoing, formal, predictable relationship between a customer and an organization. Subscriptions go beyond the traditional ways of paying for value — and put the focus on optimizing for customer impact.

Subscriptions are here to stay, and are part of the business tool kit. But they are just the beginning of a renaissance of new business models, new ways of packaging value to better align with the goals of the customer.

As Marco Bertini and Oded Koenigsburg point out in their excellent book The Ends Game, advances in technology have made it possible for firms to collect “impact data” that tells them when and how customers use their products and how those products perform, and that firms can draw on this data to turn products into seamless services.

Subscriptions and all of the anything-as-a-service offerings are just one way of pricing for impact — and that’s the real future.

Author of THE FOREVER TRANSACTION & THE MEMBERSHIP ECONOMY; Leading expert on membership models and subscription pricing. http://www.robbiekellmanbaxter.com