The world is shifting to a service- and subscription-based economy. New categories are becoming rapidly popular, increasing the speed of adoption by consumers. Some of the most popular categories are mobility, digital content subscriptions, application subscriptions, and recurring commerce.
It can be very counterintuitive to think of your product as a service. We often hear: "Why would I subscribe to headphones, instead of buying them?". Or more common: "Why would I take a €15.- bicycle subscription, while I can purchase the same bike for €150.- and it will last me years!".
The answer is in the additional services a product subscription offers.
Design highly targeted service offerings around your product.
When you don't see the value of a subscription, this usually signals that you are not part of the target audience. Take the example of the bicycle subscription. People usually comment that buying the bike is economically a better choice. By only running the financial numbers, that logic usually checks out.
What about the adjacent needs? What additional work comes with owning a bike? It'll require service now and then, you'll have a flat tire from time to time, and it might get stolen.
You might say: these are all small problems to solve! Just deal with it as soon as your bike needs service, has a flat tire, or gets stolen. But for some, these are not small problems. And under certain circumstances can cause big headaches.
Position on outcomes, not features.
In case you have a background in product development, it's common to position your product by its features and specifications. The customer or a salesperson assesses what is needed to achieve the desired outcome.
The basis of a subscription offering is an on-going customer relationship. You are not transaction once, but repeatedly. Instead of delivering a product once, an on-going service is expected.
When it comes to marketing, this means change. Instead of selling a bicycle, you provide 'always the ability to bike'. No longer sell a washing machine; instead, 'always run your family laundry'.
Three examples of well thought-out subscription offerings
Bike Subscriptions: Swapfiets
Probably one of the most known subscription propositions out there. Pioneered in the Netherlands, and now expanding to adjacent countries in Europe.
Swapfiets provides its subscribers with carefree bike-ownership. Highly popular with students who need to rely on their bicycles to get around the city. Taking away the hassle of dragging your bike to a repair shop, being without a working bike for a couple of days is worth the monthly subscription.
The students are willing to shell out the money to deal with these problems in their busy lives.
Car Subscriptions: BMW, Porsche & Mercedes
The car industry is highly affected by two big trends: sharing platforms and micro-mobility as car ownership is less of interest, especially for the upcoming generations that prefer flexibility and convenience in their lives.
Big car manufacturers can't wait with their response and develop new propositions and business models to deliver value. BMW, Mercedes, and Porsche are piloting with membership models, where customers get access to a fleet of their cars and can swap cars when they want.
At the moment, this is aimed at affluent people. We predict that these programs will extend and become more affordable as they scale up.
With companies like Fernish, Oscar, and Feather raising massive amounts of money, furniture as a service is on the rise. Catered to people who like to change their interior regularly or move around the country often, they make the process carefree.
Find more examples in our as-a-Service index.
Getting started: principles for great recurring & subscription commerce propositions.
With your options pretty much endless, starting with recurring commerce can be overwhelming. We're a big fan of starting simple. Aim for starting with something that is 'obviously more awesome' than owning the product, by providing services.
Add known services
Depending on the product you are selling, providing services is a great start. Package the service(s) into the monthly payment.
Services to think of:
- Premium delivery options and installation services
- Service appointments for the product at home
- A product replacement during repair windows
- Premium customer support with the product
This post's examples show a clear pattern: all contain an element of flexibility in the overall offering. With the right target audience, these options of flexibility enable you to charge a strong premium.
Flexibility options that work:
- Swapping products for a different type
- Temporarily add new products to use
- Charge for pay-per-use of the product
Recurring delivery of replenishments
In the field of recurring commerce, subscriptions for recurring deliveries are popular. Brands like Boldking, Dollar Shave Club, and Birchbox have proven subscriptions to be a billion-dollar market.
Adding recurring deliveries of items that are used in combination with your product are a great way to provide a service. As a result, you control more of the customer experience created by your product.
Starting points for replenishments:
- Ship replacement components for your product (i.e., new filters)
- Provide consumables with your product (i.e., coffee beans)
- Send the required maintenance products (i.e., descaling tablets)
Getting your subscription offering right will require experimentation. Ranging from pricing, additional services to targeting the right audience in your marketing, iteration is the key to welcome your first customers.
Therefore it's important to keep in mind that starting is more important than launching the perfect proposition outright. Get something up and running, learn from your first customers, and iterate on what you hear.
At Firmhouse we build the platform that transitions companies from a linear to a recurring business model. Get started today, and experimenting with your subscription offering. Looking to learn more about how we can help? Leave us a note, and we'll get in touch!