The issue of whether to offer subscriptions, or some other verbal usage, won’t go away. However prosaic the argument for subscription marketing, it has tremendous implications for all brands eager to deliver the optimum ROMI from their marketing efforts.
And if subscription selling were a marginal marketing activity not so long ago, as the relationship between consumers and sellers have dramatically changed in this digital age, subscription selling (or whatever we end up calling it) has moved to center stage.
Over a year ago, I wrote that in a data-driven marketing seminar I was giving for some Brazilian Microsoft executives, I asked how many of the more than 40 participants “have a subscription”?
Less than 10 hands were raised.
Then I asked, “How many of you have Netflix?” Nearly all of their hands went up, and you could see on their faces the growing wave of recognition. While they hadn’t thought of their Netflix access as a subscription, they realized that they had “subscribed” to services to be paid for on a periodic basis, with or without a time commitment. (That’s not a bad definition of a subscription.) They also realized that not only were their insurance policies, cell phone contracts and utility connections all subscriptions, but Microsoft’s move to a cloud business model was a classic example of subscription marketing. Why should their software customers have to be sold new versions when they can receive them automatically, without any new investment, as part of their monthly, yearly, subscription? And that was just the beginning. Look how at how it has grown.
Starting at $22/month for 24 months, the subscription program comes with an Xbox One S console, two years of Xbox Live Gold service, and two years of Xbox Game Pass access. There’s a second, more expensive tier, as well; which comes with the aforementioned $500 Xbox One X console, two years of Xbox Live Gold service, and two years of Xbox Game Pass Access — priced at $35/month for 24 months. You own the console outright at the end of the 24-month term.
By now, far more consumers understand that whether they were aware of it or not, they are subscribers to a range of services, such as utilities and products that include cable and/or streamed entertainment. And they like it.
Even the fact that the word “subscription” has the negative connotation of “commitment,” and research shows that Gen X and Millennials tend to put off commitments longer than previous generations, if you have 20-somethings still living at home, you know what I mean. “Subscription” is not a dirty word to them. Surprisingly, so far I’ve seen no hard data that proves that alternative words such as “accept,” “agree,” “support” or “sign up” are more effective than the good old suggestion to “subscribe.” Perhaps it’s because marketers are slow to change what works, or that subscriptions (despite those Microsoft executives a few years back) have a familiarity that overcomes any negative perception of undesirable commitment.
Getting the Message Right: You’re Selling ‘Access’ to Your Brand
New York Times columnist David Leonhardt points out that the economist and former U.S. Treasury Secretary Lawrence Summers calls what’s going on the “de-massification” of the economy.
Developers aren’t building as many malls and stores, because goods now go straight from warehouses to homes. Offices don’t need as much storage space. Cellphones have replaced not just desktop computers but also cameras, stereos, books and more. Many young people have decided they’re happy living in small apartments, without cars.
This important change from owning to using is further supported by a recent communication to its authors from publisher Cengage — justifiably bragging that in just seven months, it had acquired 1 million subscribers to its Cengage Unlimited program. That’s no small achievement, when the price tag is $179.99 per year. (Disclaimer: Cengage published my book, “Accountable Marketing.”)
The offer to college students is compelling:
“The industry’s first-of-its-kind subscription for college textbooks and course materials, Cengage Unlimited offers complete access to more than 22,000 products, including eBooks, online homework access codes and study guides.”
Based on statistics that show college students spending $500 per year for these materials, Cengage understandably boasts that college students have already saved $60 million.
Cengage research reports that three out of four students express a preference for “having access to textbooks and course materials” and that this “is more important than owning them.” That illustrates an important trend. What students do today will certainly influence what they will do tomorrow. Media critic, Daniel Miessler, writing in Wired, put it succinctly:
In the future, we’ll all just have a collection of subscriptions. Instead of being judged by what you own, you’ll be judged by what tier you have of a given access type.
When you think about it, owning is a committed burden, access, an uncommitted opportunity. Subscribing or signing up, or whatever it’s called, should let someone else solve the ownership problems, while you enjoy usage.
If all of this is true, then our existing data-driven marketing paradigm may be too narrow to encompass all of the exciting opportunities in full bloom out there ready to be harvested. Companies that are just now focusing on the importance of data should also be headhunting experienced marketers with sterling track records of understanding the dynamics of subscriptions and making them work.