In the first part of this series of articles, we first established that the subscription commerce business model has grown significantly during the pandemic. We then looked at different types of subscription models and what makes them attractive (or less attractive) for companies and customers. From this, we were able to derive tips for acquiring new customers and retaining them.
Today we'll first take a look at current trends and growth opportunities, then we'll focus on the challenges that entrepreneurs face when switching to subscription models and subscription management. Finally, we'll look at ways to make it easier to overcome the challenges of subscription management with the help of subscription management software .
What is subscription management?
Subscription management describes the process of managing the lifecycle of your customers' subscriptions from start to finish. The cycle begins when a customer takes out a subscription and ends when the subscription is canceled. Subscription models differ from traditional business models; therefore, they also have their own requirements for business processes. You can find out what these are further down in the text.
A look into the future – subscription models continue to diversify
Almost every industry now has pioneers with successful subscription models - there are even car subscriptions now. Success creates imitators, and imitators need an idea that sets them apart from the other providers in their segment. In short: they have to do something different!
We can see this very clearly in the traditional subscription models that have been established for a long time. Let's take a quick look at two examples: food boxes and streaming services.
Question of definition: traditional vs. non-traditional subscription models
In our study, we differentiate between traditional and non-traditional subscription models. What does that mean?
Traditional subscription models : These are digital products, online services and content streaming platforms that were the first to adopt the model and have been offering it for several years. Examples:
Software (such as Adobe Creative Cloud, Microsoft 365)
Music (such as Spotify, Apple Music)
Videos (such as Netflix, Amazon Prime)
Non-traditional subscription models : Here we refer to subscription models for products and services that have only come onto the market in recent years and thus transfer the “subscription” model to completely new areas of life. Examples:
Product box subscription: Regular delivery of “boxes” with beauty items, food, organic products, etc.
Regular deliveries of replacement/replenishment products: Regular delivery of consumables such as razor blades, spices and ingredients
Online health or fitness platforms: Supports physical and mental health management. Including running, fitness and sports training as well as mental health and meditation
Online learning platform: Offers education in other areas, such as language and music
Example 1: Food boxes
Food boxes have been on the market for over 15 years now. The pioneer was Middagsfrid, a Swedish company that was the first in the world to deliver boxes with fresh ingredients for changing meals directly to customers in 2007. Today, many people know the business model through newer market participants such as HelloFresh - a German company that started in 2011, is now one of the largest providers of meal kits in the USA and generated several billion euros in sales worldwide in 2021 .
With such sales potential, it is not surprising that many market participants are trying to attract customers with fresh ideas. Today, there are a wide range of options. There are offers that specialize in high-quality food, others pick up on the latest trends or certain types of diet, and still others target nibbles, snacks or fitness food. We can see that the basic idea of " food in a subscription box " has proven itself and created a lively market. At the same time, competition and diversification within the industry are increasing.
Example 2: Streaming services
Netflix is one of the archetypal internet success stories. The perfect example of how new technical possibilities paired with a new business idea can turn entire industries upside down. But the time when streaming and Netflix were almost synonymous is over. The first quarter of 2022 saw the first decline in subscriptions in 10 years and the company was forced to lay off employees. There is certainly more than one reason for this, but part of the explanation is probably that there are now many comparable offerings - e.g. Amazon, Hulu and Disney, to name just a few big players. In response, Netflix is introducing a discounted, partly advertising-based model this year. How successful this will be could be a good indicator of how subscription business models will develop in the future.
Our forecast
Competition between subscriptions in individual industries is increasing and is increasingly turning into a cutthroat market. And this applies to all subscription models, not just food boxes and streaming services. A provider develops a new idea, e.g. hygiene products on subscription, and as soon as it is proven successful, it will not be long before competitors position themselves with variations. And: Competition is likely to be tougher than with traditional sales channels - several snack manufacturers can sell to the same customers in the supermarket, but most customers will probably not take out more than one or two subscriptions for the same area of life. The question is: how many subscriptions for shampoos or washing machines does a household need? We suspect that the answer is usually 1, in rare cases 2. This makes it all the more important that providers who want to play in this market keep a close eye on whether and why their product/service is attractive to customers as a subscription in the long term.
It is also likely that consumers have a certain upper limit to the number of subscriptions switzerland telegram data they are willing to take out. This means that products and services that would otherwise not do so are competing with each other. To be more specific: even if a customer thinks the idea of getting their protein shakes on a subscription is great, they may not take out a subscription if they already have two streaming services, a razor blade subscription and a detergent subscription.
Let's try to get a feel for the potential of subscription models: We're specifically looking at non-traditional subscriptions. The willingness of customers to take out new subscriptions at all seems to us to be a decisive factor.
Therefore, we asked our study participants who already have a subscription whether they would be interested in a selection of non-traditional subscriptions:
Product boxes (e.g. beauty box, food box, etc.)
Regular product replenishment (e.g. pet products, cleaning products, etc.)
Subscription to an online fitness/health platform (e.g. workout, yoga, nutrition, mental health, etc.)
Subscription to an online learning platform (e.g. Duolingo, Coursera, etc.)
or whether they are not interested in any of the subscriptions mentioned
Before we look at the positive responses, let's look at the last option: Not interested. Here we saw a clear difference in response behavior depending on whether the respondents had already taken out a non-traditional subscription or not.