Unlock the Power of Subscriptions: A Win-Win for Consumers and Businesses

alissahilbertz
10 jun 2024
4 minuten om te lezen

In a world where convenience is king, subscriptions are becoming the crown jewels of consumer engagement. However, even though subscriptions are by no means a novelty anymore, there are still many companies that have yet to profit from their advantages. So, what exactly makes subscriptions so appealing? And how can companies best go about bringing a new subscription to the market?

Why Subscriptions?

Subscriptions offer a unique value proposition that creates a win-win for both businesses and consumers. For businesses, launching a new subscription represents a strategic move towards sustainable growth. This can be broken down into 3 main opportunities:

Increase Customer Lifetime Value: By offering subscription services, companies encourage customers to make recurring purchases, often at a greater frequency. This consistent revenue stream also extends the customer relationship beyond individual transactions, fostering greater loyalty. Furthermore, customer data can be leveraged to recommend relevant additional products and enhance the overall customer experience.

Differentiation in homogeneous markets: Subscriptions provide a canvas for storytelling. They allow brands to communicate their mission and values to subscribers and set themselves apart from competitors. Take sustainability-focused companies, who can use subscriptions to promote circular economy practices such as reusable or refillable products, and extensive repair services. In addition, brands can use consumer data gathered from subscriptions to tailor products or services to individual preferences, curating unique value propositions such as personalized beauty boxes or curated book subscriptions.

Build Direct-to-Consumer Relationships: Subscriptions also empower consumer goods companies to sell directly to customers (D2C), reducing their reliance on retailers. This increases profit margin, while also providing discount value to customers. Moreover, valuable data from consumers is gathered, adding value to sales promotions and product development. Finally, subscriptions provide a more predictable demand compared to traditional e-commerce, which helps alleviate some of the added pressure of D2C inventory management and production planning.

How can companies fully realize these benefits and create the aforementioned win-win? It is important to select an appropriate subscription model that aligns with both customer needs and the specific context of the industry. Below, we have outlined the five primary subscription categories, accompanied by noteworthy examples.

Examples of subscription businesses and user needs

Subscriptions can provide consumers with many different advantages, ranging from convenience to cost savings and the joy of discovery. From an industry perspective, consumable goods fit well with a replenishment model, while durable goods fit well with product-as-a-service. Note however that many subscriptions offer a combination of these different formats. A great example of this is Amazon Prime, which offers access to streaming services, but also a VIP membership to its e-commerce offering. Similarly, Spotify Premium is in essence an access subscription, but through their curated playlists and discovery features they provide further value to their consumers, setting themselves apart from their competition.

The IG&H Subscription Offering: A Triad of Success

Launching a successful subscription service is a multifaceted challenge, which we break down into three key components:

1) Desirability and Viability: Crafting the right proposition that delivers value to both the consumer and the company is paramount. It’s about igniting consumer interest and ensuring the idea is profitable.

2) Front-End and Back-End Setup: Establishing robust systems to sell and manage subscriptions is crucial for operational success.

3) Supply Chain Optimization: Ensuring the supply chain can fulfil subscriptions and its related services profitably is the final piece of the puzzle.

Thinking about launching a subscription? We offer two main approaches to help companies navigate the above challenges through every step of the process:

Growth Lab: Validating your Vision through a Portfolio of Propositions

Our Growth Lab employs a proven methodology to discover and validate a portfolio of potential propositions, ultimately launching the one(s) that is/are desirable, viable and feasible. This approach has been instrumental in creating successful subscriptions such as the Pearle Brilplan. It can be summarized as a phased approach, discovering new ideas and validating them through iterations of business design and validation experiments.

The benefit of this approach is that it allows for more creative and distinct propositions while simultaneously minimizing risk by ensuring the offering resonates with consumers before investing significant resources into its development and launch. It is therefore a great fit for companies looking to set themselves apart, and for more risk-averse companies that want to be confident that their idea will work for their customers and themselves before launching it onto the market.

Rapid Launch: From Paper to Product in 1 Month

While the Growth Lab is a great way to safely launch a new and unique proposition, we also recognize that subscriptions have certainly been done before. Therefore, we don't always have to start from scratch. Through our experience in launching subscriptions, combined with insights from existing market leaders, we are also able to deliver a subscription service in just one month. This includes a fully functional front-end for customer acquisition and a back end for efficient subscription management.

The benefit of the Rapid Launch approach is that it provides companies a fast and inexpensive way to see how their customers react to their new offering and directly reap the benefits. In addition, this allows them to test and experiment with variations as they go along.

Choosing Your Path

Curious about the opportunities a subscription can offer you? Whether you prioritize speed or risk mitigation, real-world testing or a fail-safe launch, IG&H tailors its subscription offering to meet your company’s unique needs. Our expertise ensures that your subscription service not only meets market demands but also exceeds consumer expectations.