A brief history of subscription commerce
Largely on the development of subscription services was influenced by Netflix, which is already in the “zero” worked on an unusual model. The service was arranged as follows: the buyer noted in the catalogue need movies, in response, Netflix sent the next day, the DVD had to be returned through the mail on the same day. Together with the disc company has applied the envelope.
That is first killed and Netflix rentals, and then moved to digital, becoming the largest player in the market of cinemas. In Russia it hardly would have worked because we have the level of development of mail is on a different level, but in America everything was OK.
Then “ten” in the United States began a full-fledged boom of subscription services. At that time there was Dollar Shave Club, which many consider the founder in the delivery of consumer goods by subscription. Project revenue grew year over year, reaching $152,4 million in 2015. In 2016, the project bought Unilever.
But in fact, the popularity of the subscription model is still due to the development of digital. The Internet speed has increased manifold over several years, and started to work on streaming services.
Before you had to download the file, and people depended heavily on Internet speed, and all content producers want to distribute it exclusively on CD, DVD or other media. Now it is irrelevant, because the Internet is faster. Therefore, there are services like Apple music and Netflix is a pure streaming history.
Interesting fact — statistics show that currently about 70% of all businesses with a subscription model are in the USA.
This is a good proof that the mentality of the average consumer and the level of development of mail abroad are very different from ours. We can say that the conditions abroad are favored to open a business with a similar method of monetization.
What should be a successful business subscription?
In fact, any successful business subscription, regardless of the sphere, adhered to four basic rules.
The business needs to be a clear predictability of the demand for a product/service that it sells.
For example, if it’s a food delivery, then you need to understand how often the user wants to order food once a day, week or month.
That’s why the subscription is not applicable to certain business sectors, such as taxis.
Taxi is an irregular action that the user receives upon request. It is impossible to be sure that the user bought the car and the other order with 100% accuracy.
The goods/services should be expressed as value to the user.
In fact, the item linked to the first. As the business subscription needs to be clearly planned, those goods and services that are offered to the user must be important and necessary for him.
For example, ordering food is associated with basic human needs, so you can be sure that the user will not cease to order just in mood.
The product or service can be easy to produce in mass production.
In addition to product or service, the user must be provided with free additional services/integration: support, forum, trial version.
A subscription is a service which the user subscribes, and integration is an incremental cost, which captivates the user to renew the subscription and use of the specific service.
Digital vs offline. Where better does the subscription work?
It is understood that the subscription model in the digital and offline are two totally different things. In offline subscription covers:
a box of “surprises”,
The list is limited, because only in these areas implements the basic business rules for the subscription mentioned earlier. But, unlike digital, offline added cost of shipping goods.
We also did their business on a subscription — service for the delivery of sets of children’s products PuffPuff. They fit well on a subscription, because are bought regularly and rapidly over. Therefore, the buyer wants to shift all the headache with shopping at the store.
Unlike ofine in digital can be sold by subscription anything. But it is all conditionally can be divided into:
It’s all simply because the subscription lies with the audio and video, and textual content.
The most frequent example is online cinemas, which even in Russia there are already several dozen: ivi, Start, Megagogo, Amediateka, “THT-Premier”. Movie theater market is growing along with the income of players in this market, talking about it, and research, and the participants themselves.
In fact, the subscription — only model, in which the user will be happy, and the brand will be able to earn money.
User wants to have access to all content from any device without having something to download or buy physical media, as a content producer wants is guaranteed to find its audience. Online cinema is a place where these interests intersect.
Subscription fits well in the specialized media. They bring clear value to the user to give unique content, which often is interactive. So cases like “Radio Moscow” are working and developing.
Classic media the situation is more complicated. Standard Paywall isn’t working as well because users often do not understand what they take money. For conditional 150 rubles a month, a person gets access to information that can be found in other free sources.
Service — the most common scenario, when running a subscription. Any product, digital is perceived as SaaS, be it a task tracker for personal use or CRM for a large company. Therefore, TunnelBear, and MailChimp, and most services on the Internet subscription with numerous plans.
The same applies to software like Photoshop and Sketch. It was early IN the piece goods, which they bought once a year. Now the software market is positioned more as a service that improves, renews, which has support, integration, plugins. Now it’s a comprehensive service that the user purchases the subscription.
Education is at the crossroads of content and the service is some of the content that is issued on request, but to which is added an excellent interface, support for the curator, gamification and other amenities.
In education observes all the basic principles of a successful business on the subscription mentioned earlier.
There is content that is easy to duplicate. Taken one course and is distributed on a large number of participants.
The content has a clear value to the user. Person comes with a specific request like “I want to learn social media marketing”.
The content is consumed with some regularity, as education should be regular, otherwise it makes no sense.
Successful domestic examples: Bang Bang Education, “Netology”. Often educational services provide different options for user interaction and content, combining multiple models of monetization. In the same “Netology” has the opportunity to buy one specific course, or take a subscription at three courses for six months.
It is understood that any projects with a subscription model work better in the b2b segment. Business is hard to get off with any product, especially if it is large and is associated with many production processes.
For example, our company would be difficult to move from task-tracker Redmine to Jira, since we are using the service more than ten years and during that time we have kept a history of tasks and projects.
With offline business, the situation is more complicated, as it is not associated with production processes, but rather with infrastructure. Here it comes in the economic benefits, level of service, speed of delivery. If the conditional “Komus” will inflate the price of shipping goods from the warehouse, the company quietly and without losses will be able to go to the “Platypus”.
The main problems of the business subscription
Most of the major players choose the delivery model on demand (on demand).
This applies to offline business, especially of consumer goods, “the ABC of Taste,” “Crossroads” and other retailers have already started shipping.
In terms of delivery on request, the subscription makes no sense. Why would a person want to make in the next six months, when he can get any product within hours?
The subscription is unprofitable for buyers.
Previously when the user paid for the product or service piece, in the end, he gave less money, just the purchase amount was higher. Subscription also psychologically perceived as something small and inexpensive.
It may seem that it is good for business, but in fact, everything must be a win-win. If the user becomes uncomfortable to use the product, its purchasing power falls, and the business is losing money.
Few successful cases.
In Russia there are few examples where it turned out to successfully implement a subscription model in the offline world, especially the delivery of goods of daily consumption. This is largely due to our mentality — Russian users are not generally inclined to trust their future services.
The high cost of customer retention.
Subscription commerce is the business model, where no room for error. If something goes wrong, the service will go wrong with shipping or bring a defective product, the user immediately cancels the subscription. In digital to make it even easier.
Materials on the subject:
Now the subscription can be made even on the toilet paper: how subscription-based model captures the world Business subscription: how to make money on subscription commerce
As we ordered food in the office — a review of services for the delivery of meals
What customers praise and criticize the company in the areas of catering, beauty and auto — research
Why you should not charge money from their first 100 customers
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