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Business & Strategy

Subscription models and experience strategy

Every now and then an article pops up touting subscription models as the wave of the future. And while they are future-ready, Having come up through early Netflix, and then having led customer experience and product development at among leadership roles in other sub-based businesses, I can tell you for sure: the model is certainly not new. Ironically, one of my earliest main-stage speaking engagements was for a subscription model summit. That’s been 15 or so years ago, so yeah: this is not new.

Subscriptions have always been both appealing to businesses and complex to get right

But that talk I gave 15 years ago actually offers an interesting framework for our discussion now: I was invited to speak about what our testing at around selling subscription models was revealing about the future of subscriptions. Magazines, of course, were then (and now) a content model whose future was in question: no one knew if anyone would still want magazines once we had smartphones and tablets (this was prior to the launch of the iPad, which really intensified the hand-wringing). But through experience-oriented multivariate testing, we were learning what kinds of messaging, design elements, and experiences people were most associated with likelihood to buy, to renew, and to rate the magazine highly. Which meant that we could intuit, on some level, useful insights about what made people feel the most inclined toward a subscription.

Subscriptions have always been both appealing to businesses and complex to get right. If you do get it right, you create not only a recurring revenue model but also a built-in community around your product or service. If you get it wrong, your brand seems opportunistic and greedy.

So let’s talk about subscription models.

How do you get subscription models right?

As with almost everything, the key is to create a subscription model that feels like it was designed with the customer in mind. The best models make customers feel like they’re part of something — and maybe part of something exclusive — as opposed to just another number.

It’s not impossible to achieve this feeling, but it’s getting harder every day. In part, that’s because the subscription model landscape has changed dramatically in recent years.

When I started my career, the only common subscription models were for things like magazines, newspapers, and cable TV. With magazines in particular, there was a real sense of identity around the brands you chose to subscribe to. It was aspirational: you might subscribe to Performing Guitarist magazine but never set foot on a stage.

Now, though, you can subscribe to just about anything: meals, clothes, makeup, furniture, even dog food. It’s harder to create an aspirational identity around dog food. (Although having also worked on cultural strategy for a famous brand of dog food, I do know that it’s perhaps not impossible, as the results of a search for “super premium dog food” suggest.)

Of course Amazon Prime is a subscription model too: it’s just fundamentally based around the operational and experiential process of e-commerce shipping (with a whole lot of perks rolled into that), rather than access to content.

How do you get subscription models wrong?

Well, first of all, I’m going to say that it’s pretty hard to convince me that a model that is both subscription-based and ad-supported is a good experience.

When I was at Netflix, we were very focused on creating a great subscriber experience: this was during the DVD era, but the mindset was the same. I don’t see the company as it was then using ads to offset the model. That’s mostly because it’s intuitively clear that ads can be intrusive and break the flow of watching a movie or TV show, and an emphasis on experience was paramount.

The race to the bottom is bad for business and bad for customers. It leads to situations where brands are willing to sacrifice long-term loyalty for short-term gain

In the years since Netflix rolled out its streaming service, more and more content providers got in the game and followed Netflix’s lead, offering ad-free content — for a price.

Only now, after having to report in its Q2 2022 earnings call that it lost 970,000 subscribers between April and June, Netflix is rolling out an ad-supported model — and that will have other ad-free providers looking at moving in that direction.

One challenge is that as the number of subscription models has increased, so has the level of competition. And as competition has increased, so has the pressure to offer ever-increasing discounts and free trials that don’t necessarily translate well to a better customer’s experience. Free trials are great, but if there’s no effort to onboard users during the trial period and give them a sense of what great content or experiences they’re in for, they’re just going to terminate and add to the company’s churn. That churn tends to make companies focus on slippery retention techniques rather than welcoming onboarding techniques. And while both of those programs are relevant, only the onboarding tends to be focused on creating a sense of community — retention is too often focused on stopping the bleeding.

So the race to the bottom is bad for business and bad for customers. It leads to situations where brands are willing to sacrifice long-term loyalty for short-term gain. And that’s a dangerous trend wherever it crops up.

Making subscriptions work better

There’s no easy solution to this problem, but I think it starts with rethinking the way we approach subscription models. One possible answer is to move away from a one-size-fits-all approach and start tailoring our models to fit the needs of our specific customers.

For example, many subscription-based software providers companies offer a variety of subscription options, from monthly to yearly. Some even let customers choose how they want to configure their subscriptions.

a typical subscription offer allowing users to choose either a monthly or annual plan

Some companies also offer different levels of service, depending on how much customers are willing to pay. For example, premium members might get free shipping and access to exclusive content.

The goal should be to create a model that feels like it was designed with the customer in mind. When customers feel valued, they’re much more likely to stick around for the long haul.

Improving the subscription experience

So, if you’re thinking about starting a subscription-based business, or if you’re already running one, here are some questions to ask yourself:

  • What are my customers’ needs, and how do they align with my business needs?
  • How can I create a model that meets those needs while fostering a sense of community and identity?
  • How can I make sure that the operation of my model is customer-friendly and easy to understand?

Answering these questions won’t be easy. But if you can find a way to do it, you’ll be well on your way to creating a subscription model that works for everyone.