For any business launching a new product or service, the subscription model is an attractive one.
Once reserved to gyms and fitness centres, the subscription model has permeated through almost every single vertical in recent years.
Services like Spotify and Netflix are well-known and used by a sizeable portion of the global population, but there are many smaller Direct to Consumer (DTC) subscription services like Dollar Shave Club, Who Gives a Crap, Hello Fresh and Zipcar which have all proven successful in their respective industries.
For businesses, such a model offers the prospect of customer retention as a default state, rather than the usual churn.
It’s the promise of reduced costs and increased penetration by simply replacing ‘ownership’ with ‘usership’.
But as enticing as it is, the subscription model is not for everyone and does carry with it some challenges.
navigating the challenges
Launching Subscriptions and Pivoting – a white paper produced by the Launch Marketing Council and brought to life by global independent launch agency Five by Five – details the journey of Tummify, a dairy probiotic founded by entrepreneur Simon Micarone.
Aiming to disrupt the gut health market dominated by Yakult, the product differentiates itself by being low in sugar and high in performance.
Brought to market in November 2019, Tummify found an ideal launch partner in the form of Harris Farm, where it could reach a health conscious consumer willing to pay for a premium product.
But it was unable to enjoy as much success with a DTC subscription model, which has been unable to have any real impact yet owing to a lack of marketing spend.
Tummify is by no means the first business to face challenges when launching a subscription.
LG Electronics former CMO Angus Jones warned of some potential dangers that come with launching a subscription service.
“We are generally happy to subscribe to give us access to something like a gym, a streaming service or a newspaper but when it comes to goods, not so much,” he said.
“Years ago we had bottles of milk delivered each day now we buy from the supermarket and wine subscriptions tend to be cancelled to give us more flexibility in a bottle shop. Maybe it’s about getting the ratio of quantity and commitment duration right?”
Jones also mentioned the challenges for manufacturers specifically looking to disrupt a retail environment by launching a subscription service.
“There are a number of barriers to a manufacturer operating a subscription model: Firstly, established global accounting practises would not easily support it,” he said.
“Secondly, we’d create a conflict of interest against existing bricks & mortar strategy with retail partners who hold all our customer data. Lastly, resources to plan and execute such a strategy would need to be very different from normal practices.”
There’s also the matter of ‘subscription fatigue’, as consumers begin to feel overwhelmed by the seemingly endless number of services available.
A study last year found 75 per cent of respondents find it harder to choose a subscription due to a high variety of options.
And sometimes, a subscription model is simply flawed, a point proven by movie ticket service MoviePass which initially promised unlimited movie tickets for a flat monthly fee but ultimately was unable to deliver on the promise profitably.
To learn more about the ins and outs of launching a subscription, you can download Launching Subscriptions and Pivoting here.
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