A Surprising Advantage for Subscriptions

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Aha! moments are fun.  

You know, those light bulb moments when everything suddenly clicks and you come up with a brilliant idea/solution/connection/product/etc.

When I was diving deeper into subscriptions to create my new Pragmatic Learning Network course, Accelerate Your Subscription Business, I had several aha! moments, but this one is probably my favorite. 

 

Subscriptions are better products
 

Before I tell you why, let’s go back to the beginning, way back to the olden days—way before subscriptions were as ubiquitous as they are today—when people would buy software in shrink-wrapped boxes with floppy disks in them from stores like Fry’s Electronics, CompUSA, etc.

Then, people would take them home and do one of three things:

  1. Install and use the product as intended
  2. Install the product, but hardly use it much afterward
  3. Never open the shrink wrap 

For the software vendor, all three of these scenarios netted the same result: They were paid money for selling the product. It really didn’t matter to them if the buyer used the product or not.

As product people, we want more than that, right? We want to build and market products people use, right?

That’s why subscriptions are better products!

Nowadays, software vendors care a lot about whether or not their buyers use their products.

Buyers who don’t use the product rarely renew their subscriptions. This is churn, and churn is bad (obviously).

Customers who use and love the product will continue to pay for a long time. And these are the customers with high lifetime value.

To grow lifetime value, software vendors—or anyone with a subscription product—need to help their customers onboard and use their products. Thus, customer success departments were born, and companies started listening more to their users. They added new features and capabilities to make their users’ lives easier and better.

Hence the aha! moment: Subscriptions are better products because vendors continually tweak their offering to add more value to their users. Subscription vendors care about how much value their customers receive.

Take Facebook, for example. It might not seem like your traditional subscription service, since users pay in data to use it, instead of money. Facebook is constantly adding new features that add value to their customers. Think back to when you first started using Facebook. It was pretty good. But then they added new features, like Facebook Live and the Marketplace, and it became even better and more valuable to you as the user.

And while adding more value is essential, making it easy for users to receive that value quickly is even more important. There’s even a metric many VCs use called “time to value.” How long does it take for a customer to get significant value from their new subscription? The easier a subscription company can make it for you to see and experience the value, the better.

To be honest, “Subscriptions are better products” wasn’t my initial aha! moment. It was really the opposite. It surprised me to realize that traditional, non-subscription companies don’t seem to care if their buyer’s used their products.

But it took studying the beauty of the subscription business model to see that. After all, a fish doesn’t know it’s in water.

Traditional companies care about communicating value to win the purchase. Subscription companies care about that too, but they also care about delivering real value to their customers.

Here is a HUGE hint: If you’re not a subscription company today, learn from them. Care about the value your users truly receive from your products. Find ways to monitor and improve it.  If you don’t, a subscription will come along and …

That’s why subscriptions are better products.

Mark Stiving

Mark Stiving

Mark Stiving is chief pricing educator with Impact Pricing LLC. Connect with him on LinkedIn


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