Thanks to the ever-changing consumer landscape, coupled with the global pandemic, the number of brands launching subscription programs skyrocketed, fueling explosive growth. In fact, the UBS financial services firm coined this the “subscription economy.”
It predicts that this new economy will grow to $1.5 trillion by 2025, more than double its $650 billion valuation from this past summer.
Amazon Prime is perhaps the most recognizable example, boasting over 200 million members since its launch in 2005. In the past couple of years, however, other marquis brands have looked to capitalize on this growing trend in increasing numbers. One such example is retail giant Walmart, which recently marked the first anniversary of the launch of its subscription program, Walmart Plus, with an estimated 32 million members as of mid-September, according to Deutsche Bank. This month, Best Buy launched its Totaltech membership program
nationwide after piloting it in several test markets throughout the country earlier this year.
Subscription programs are also surfacing in the restaurant industry, with Taco Bell’s pilot Taco Lover’s Pass that offers customers in Arizona one free taco every day with a $5-10 per month subscription. MyPanera + Coffee
, the unlimited coffee subscription from the well-known bakery, is designed to garner more share of wallet from consumers in the coveted breakfast timeslot. The program launched in early 2020, and for under $10 a month, customers can get one “free” coffee every two hours with unlimited in-house refills. Both the Taco Bell and Panera subscription programs run in parallel with more traditional loyalty programs, adding to the ways customers engage with these brands.
From the Amazon model to the Taco Lover’s Pass, there is a myriad of ways to weave a subscription program into your business—whether in tandem with an existing loyalty program or as an independent product. Once a company determines this model is right for the business, executing it successfully is no small undertaking. Here are five key steps to set any business up for success.
1. Crunch the numbers
A rigorous economic model can lay the foundation for a subscription program by ensuring the value proposition is reciprocal between the business and the customer. Taco Bell’s pilot program includes two different monthly fee levels so that executives can better understand the program’s economic impact. Give away too much or set the program cost too low—and it can be an expensive mistake. Give away too little—or set the program cost too high—and enrollment and engagement in the program will suffer, as will renewal when the time comes for customers to decide whether to renew. Instead, look for a price range that fits in the sweet spot—somewhere that won’t break the bank but offers enough value to make it worthwhile to the customer. Once that range is determined, take steps to test the program in the real world.
2. Pilot the program
Taco Bell’s prudent decision to pilot their program in a key market, positioned externally as a pilot, helps set customer expectations. What the organization learns through this pilot will help solidify its assumptions in the initial economic model, including the price point, terms of the program, and more. It will also help guide decisions regarding the expansion of the program into other markets and measure the impact of incremental sales generated.
3. Don’t forget operational aspects
A subscription program needs to be simple enough for front-line employees to understand and implement with ease. Any program will primarily run through critical front-line employees, making simplicity and clarity paramount. If customer-facing staff are not fully trained in the program, or there are conflicting messages to customers, the result can inflict lasting damage to your subscription program. Additionally, it must be simple enough to administer through digital channels. If it’s not, it will create unnecessary customer friction and potentially lose brand equity. A well-trained workforce and robust digital capabilities ensure a successful delivery to combat unnecessary operational difficulties.
4. Be a giver, not a taker
Once a program is in the market, it’s very difficult to pull back program benefits without eroding consumer trust and brand equity. It’s better to create a more conservative value proposition on the front end and add benefits over time. Amazon Prime has a fairly good track record with this approach. However, recently a new delivery fee was added to Whole Foods purchases made through Prime. This created in-market buzz, but not the kind Amazon sought. To the customer, especially the customer already using this service, such fees can feel like a betrayal of loyalty. Customers can be put off and very vocal when a company takes things away or adds additional fees without warning. Avoid this by being prudent in the early days, adding more value with progression, and communicating often.
5. Think long-term
Finally, when designing a program, think in terms of how the company and customer want the experience to be today—and three years out. It’s also important to align the strategy of a subscription program to its purpose or end goal. For example, is the subscription program created to capture data, retain customers, grow engagement, generate a new revenue stream—or all of the above? A program blueprint and roadmap should consider this so that the organization can rally around critical objectives to ensure its success and retain its value across stakeholders.
Drive business impact
When designed and deployed correctly, subscription-based programs can add another level of trust and value to customer relationships, driving drive higher levels of participation. Following these considerations helps increase your odds for long-term success and drive the business impact. Furthermore, the data on such programs is clear. The 2020 McKinsey survey
found that members of paid loyalty programs are twice as likely as those in free programs to spend more on the brand after subscribing. Adapting the right mix of strategies and tactics is crucial. Constructing a program from a firm foundational, well-designed blueprint that takes these and other aspects into account can create a successful subscription model for any brand.