The Subscription Economy (Part One)

by Eleanor Pyne Figaro Digital

On 4 February, Touchnote hosted a panel discussion in their Shoreditch office on the subscription economy. Four industry professionals, Gousto CMO Tom Wallis, Perky Blenders Co-Founder Victoria Cozens, Financial Times Marketing and Communications Director Joanna Edwards, and Touchnote’s own CEO Dan Ziv, came together to discuss their subscription business models – which model has worked for them, what challenges brands now face, and what the future holds for the subscription economy.

How do you view long-term subscribers in comparison to casual subscribers?

TW: “The vast majority of our customers are subscribers. We then have what you might call casual users – we call them transactional users – who order on an ad hoc basis, and those are all customers who have previously been subscribers (because you can only join as a subscriber). That group of people is split into two types: one I would classify as those who are coming back, potentially, to be subscribers, and there’s another type where they don’t particularly want a subscription, they don’t want to be in the regime of picking a box every week so those are maybe true casual users, true transactional users, and for us what we’re trying to do is find ways of identifying them, making the product a little more suited to their needs. So in the work that we do, we’re really trying to find ways to encourage people back to subscription.”

VC: “We have four outlets, so we’re a bricks and mortar business as well. When we first started the business, we had one outlet, and if you looked at the data of where our subscribers were coming from, they were very local. The change in our subscribers now has become 70 per cent gifting. It’s wide and even some worldwide subscribers, but a lot of that is organic and a lot of that’s come from the love we’ve had in our local area, people buying for themselves, enjoying it, then gifting it. You can tailor it so much to have it weekly, bi-weekly, monthly, how do you make it? French press, do you have a grinder? So we work very hard to make sure there’s enough flexibility so that it covers everybody and everybody’s taste and everybody’s needs at home.”

DZ: “I think what’s interesting about Touchnote is that we are one of those services that are maybe the first in our industry to move into this model. So we were around for 10 years doing normal eCommerce and then as we pivoted we saw a completely different profile of customer coming in with a different need. Today, you can only join Touchnote as a subscriber but then if after the free trial you don’t want the subscription, you can buy casually, you can buy on demand, and that’s great business for us as well, we’re not shying away from it but for us we understand the valuable position posed to customers.”

JE: “We give our customer something before they subscribe, so we have registered users who get three free articles per month. We can engage people with our content before we actually have to ask them to give us any money, whereas with some of the more physical products, like coffee or food, it’s a bit harder to do that. So we always have a pool of leads, so to speak, to go to and try to convert from being what you could consider to be a casual reader into being more loyal, subscription-based, paying customers. We also know that 91 per cent of people who register will subscribe within their first month and the majority of those straight away, so there’s also a big push to get people at that point. We try to present the value from day one to ensure they convert from casual subscribers to more loyal ones.”

Do you find that “try before you buy” sampling works?

JE: “When I first joined the FT, I worked with Investor’s Chronicle and the lowest value package was about £150. We only offered full price subscriptions – it was either an annual direct debit, an annual credit card payment or a one-off payment, so we were expecting people to automatically go into that high-value payment other than some articles they could read online. We introduced a trial option – four weeks for £4 – trying to build up that habit, trying to build up that engagement in that period of time, trying to really reinforce the value and get people hooked so that we could then take them on that journey. Our products are strong but sometimes it’s just getting them into people’s lives, getting them into their hands. But it’s a lot easier when it’s lower value I guess – it doesn’t cost us much to do that.”

VC: “We’ve tried sampling and getting that product into people’s hands. London Coffee Festival is a main event of the year for us, and twice we filled 500 packets and put a discount code with it. One or two people out of the thousand samples signed up so it was actually something that didn’t work for us and it really surprised me, whereas I can do something like a collaboration with another brand and we attach a code related to that and we’ll see a bigger sign up. So even though I put the coffee into someone’s hands, that didn’t convert. It’s trial and error, trying lots of different things. For us, we’ve been very lucky with the organic growth and the word of mouth.”

DZ: “What we’re trying to explain to people is actually you need this in your life, you need to share it on a recurring basis. So what we do is we actually give two free cards, not one, and the reason for that is if you’re going on holiday or if you have Valentine’s Day and you decide to activate it during the free trial then you send that one card and it’s very easy. Then you have a second one and so you start thinking, “what am I going to do with this other card?” Then you either send it to yourself – if you’ve been on holiday you might want a nice picture at home – and then you can experience it yourself, or you send it to someone else at which point you get two people seeing things and it creates a bigger cycle for you, a bigger loop to actually convert.”

TW: “We used to give 50 per cent off or more on the first box and then we extended that to the second box and then a month. We found that the usage went up enough to pay back the costs of it.

Keep your eyes peeled for Part Two of The Subscription Economy, which includes managing subscriptions for physical products and customer complaints.