Mercedes and BMW introduce subscriptions. But are they taking it too lightly?
Subscription Case #5
By Niels Vestergaard
This summer, BMW launched a subscription on heated seats which made the installed seat heating in new BMW models accessible only through a paid subscription. This would cost $12 dollars a month. I think it’s safe to say that BMW’s customers were not happy about this proposal, even though BMW was kind enough to offer a free trial period of one month for a feature that was already installed in the car at the time of purchase.
Anti-Churn is retention. How do we secure a unique experience for every subscriber?
By Niels Vestergaard
Last week I had the pleasure of experiencing my colleagues Jonas Juul Jeppesen and Anders Sørensen in conversation with subscription experts Marie Lykke Lützhøft from TV2 Denmark and Rasmus Lindstrøm from StoryTel. Fortunately, this conversation was recorded for Subscription Talks, our Danish podcast that you can find here.
Here, we talked about the eight areas in focus in connection to reducing churn. The eight areas are:
Engagement and use
Strengthening the value offer
Today, I’d like to dig a little deeper on loyalty, onboarding and data analysis. Also, I will namedrop some of the world’s best within each area, so you can be inspired by the best, just as we do here at Subscrybe.
Community is a strong loyalty-driver
Nothing creates more motivation to keep a subscription than the opportunity to be part of a community. If you succeed in creating a community around your subscription product, it’s not just a matter of reason, when a subscriber is considering churning. It then becomes an emotional decision, whether you’re ready to leave a community that you’re already a part of.
Members of the cycling services Zwift and Peloton very rarely say goodbye to their workout buddies, Strava users don’t want to lose the opportunity to share results with friends and family and members of World of Warcraft never really say goodbye to the game that they share with all of their friends. If you leave Rent The Runway, you are no longer part of the community created around renting, sharing and talking about the latest fashion pieces. It means that you are no longer part of the club.
In other words, it’s a retention method that cannot be compared with any other. It’s not about monetary benefits, convenience or other regular subscription metrics. It’s about relationships – and they are hard to say goodbye to.
Subscription companies who are experts at community:
Rent The Runway
World of Warcraft
Loyalty is also an effect of how high the cost is by switching
When speaking about retention, as a subscription company, it’s all about becoming such an indispensable part of the subscriber’s life that it gets too expensive (emotionally or financially) to say goodbye. We also call this switching costs and this is about the cost of cancelling a subscription or moving to a competitor.
Note: This doesn’t mean that you should make it difficult for the subscriber to cancel a subscription with you! It’s about strengthening the relation so much that the subscriber couldn’t dream of ever breaking it off.
In order to ‘make it expensive’ to make a change from your subscription, you have to collect historical data and present it to the subscriber in the right way. At Spotify, they do this through AI-generated content such as Discover Weekly and other recommendations, but they also do it through their yearly ‘Spotify Wrapped’ recap which shows what you listened to and how much you listened.
Not only is Spotify Wrapped an especially popular service and members love to share their music year with each other, it’s also an opportunity for Spotify to tell the subscriber: “Just look how much you use our service!” – and that’s the real value driver here. You can find similar initiatives at StoryTel, Headspace and other popular subscription apps and this is not a coincidence. Underlining your own value is not just valuable as an individual, but also as a subscription.
Subscription companies who are experts in switching costs:
Retention starts with a warm welcome
At Subscrybe we preach that a reactive approach to retention is antiquated and will result in a difficult dialogue with customers, who are moving away from your business.
That’s one of the reasons why the retention work starts in the same second the subscriber signs up for your subscription. And just as the best defence, is a good offence, a great onboarding is very, very healthy for the long-term retention.
There are several parameters in great onboarding. One of them is what we call Customer Success, which is all about securing that the subscriber understands the full value of their subscription and includes presenting benefits and features in the best possible way. This is especially important for B2B subscriptions where the assessment of value is especially critically.
Furthermore, focus on a fundamentally great customer communication (especially in your welcome flow e-mail) is extremely important. This is where you need to put yourself in the role of the subscriber and try to meet challenges and questions. Here, it’s extremely important that you make sure that the customer can contact you, since this is a great opportunity to demonstrate your company’s equity and expertise and that you care about the subscribers getting a comfortable starting point.
In time, the focus on onboarding has become more important and some subscription companies are investing heavily in this area. The New York Times has 10 employees who work exclusively with creating the perfect onboarding experience. I’ll let that sink in for a moment…
Subscription companies who are experts at Onboarding:
The New York Times
Data is the backbone of the most important retention efforts
It becomes obvious that the above-mentioned areas become easier to perfect, if you’re good at collecting customer data. Spotify’s Discover Weekly is based on a very sophisticated AI-setup and it gets easier to design the right onboarding process if you know how subscribers use your service, what the typical challenges are and which areas of your product that is especially popular.
A focus on customer data can do wonders for your churn prevention, because you will be able to predict churn behaviour and be able to intervene, before the customer cancels their subscription.
A customer data setup is also the prerequisite for delivering gamification and collecting historical data which make it hard for the subscriber to say goodbye. We as subscription companies can learn a lot from the market leaders who have a specific focus on data collection right from the start.
If you don’t collect customer data, you are losing the number one opportunity you have to get insights into why your customers churn. And this turns out as operational gold, when you apply the data you’ve collected.
Subscription companies who are experts in data:
A little note…
When all of this is said and done, it’s important to note that the best retention comes from practicing Subscription 3.0. It’s about letting customers pause their subscriptions, not forcing too many offers in their face and utilizing customer data in a responsible and transparent way. The Danish subscription startup ‘The Champagne Box’ are running a relatively simple subscription setup and they have long waiting lists for their subscription box – completely without the use of customer data and gamification. And this is because the subscription is valuable, transparent and oh yeah – they have an amazing community!
Churn is the major subscription headache of our time. Here are eight challenges that we often see in large organizations!
By Morten Suhr Hansen
The modern consumer loves subscription and over the latest years, we’ve seen the number of subscriptions in Danish households rise, as more and more companies offer exciting subscription solutions. And during COVID, many subscription companies were enjoying impressive growth!
However, in these months we are experiencing an unprecedented storm as the private economy for many households are heavily challenged. Rising prices on food, electric, heat and many other products result in a falling consumer trust. This also means that many households are now looking through their fixed costs to see, where to save a few bucks.
Behind the hit series ‘The Playlist’ from Netflix: Why Spotify is one of the world’s most succesful subscription services
Subscription POV #36
By Morten Suhr Hansen
Last week, Netflix premiered the mini-series ‘The Playlist’ which follows the story of how Spotify became one of the world’s largest subscription companies. In six episodes, we follow founders Daniel Ek and Martin Lorentzen and the team around them since the creation of the company in 2006 and to becoming the world’s leading music service.
Naturally, ‘The Playlist’ is a dramatization of how Spotify came to be and it is a mix of fiction and reality. But that doesn’t change the amazing entrepreneurial story that lies behind the series. The title has been showered with good reviews and I will recommend it to you and any other subscription geeks. And from the story comes some important points on how Spotify became a success. Points that any subscription business can learn from!
I’ve been waiting to write this article for a long time, because, well – this is the big one!
I know, I know, Netflix still has more subscribers than Amazon, but there are several reasons to talk about Amazon Prime, especially since they started acquiring all sorts of different subscription services and it seems that Amazon is putting together their master plan for the subscription of the future. But let’s come back to that.
What makes Huel, Strava and Masterclass the subscription companies we should be looking at?
By Morten Suhr Hansen
In order to identify the biggest subscription trends within the subscription movement, we at Subscrybe are always aware of the best subscription companies in the world. By studying these companies carefully, you will get an understanding of which elements help to create a successful relationship between the company and their customers and thereby create the foundation for a strong business
My collague, Niels Vestergaard, has just published our Subscription Case Report, where we dives deep into the 10 most successful subscription companies from all over the world and analyses his way to some of the reasons behind their success.
In this article series, I try my best to find unique stories and original perspectives on the subscription economy. And a novel interest of mine sparked the idea for an unexpected episode of Subscription Case.
Before the launch of the Netflix series “Drive to Survive”, I, like many others, had little to no interest in Formula 1. I remember it running in the background of my childhood home, but never once had I sat down to spectate a Grand Prix. It seemed the sport was intangible; I didn’t know any of the drivers and it seemed like a glorified pastime for billionaires racing around circuits all over the world.
One of the most ambitious subscription startups is bankrupt! What can we learn from the collapse of Simple Feast?
Subscription POV #35
By Morten Suhr Hansen
After many years of uninterrupted success, the subscription movement is at an interesting crossroads. For years I’ve been writing about how the valuations of subscription startups have been through the roof. The faith of investors that a growing subscription business was an almost guaranteed success seems to have come to an end. And more and more companies threw themselves into the battle for subscribers along with all the exciting startups.
When do you start building loyalty from your subscribers? The second they sign up!
Subscription POV #33
By Morten Suhr Hansen
We are living in economically uncertain times and it is still becoming harder and harder to attract new subscribers. Perhaps you have already experienced this in your own subscription business? If not, you are one of the lucky few. This means that the work of building loyalty and a long lifetime for your subscribers is becoming even more important in the coming months.
HubSpot – A CRM platform and a well-oiled subscription machine
Subscription Case #4 – HubSpot
This series of articles is not about B2C subscriptions alone and after having studied two delivery services, I thought it was about time to include a Software-as-a-Service solution. Many of us use a SaaS solution in our day-to-day work and there is a reason why this model has created some of the world’s most successful subscription companies.