The third and final instalment of our report on the Touchnote panel discussion on the subscription economy covers competitors, and the dos and don’ts of subscription models. See Part One for insights from 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 into long-term and casual customers, and sampling.
In the last seven years the subscription economy has grown around 350 per cent – do you look to your competitors, consumer feedback, and where the industry is going? If you’re business is growing quickly, how do you keep up – does your model change?
DZ: “The pivot to a subscription model for us has been a great way to differentiate ourselves. If you think of the mammoths in our industry, the Moonpigs, the Funky Pigeons etc, these are hallmark, these are multi-million pound businesses that are incumbent so they’re very established in the market. They spend money on seasonal events – Christmas is a massive one of course and it’s all quite similar. So for us, the ability to come in and say “we are trying to create a different behaviour for you” has created a fundamentally scalable model for us. Christmas is great for any commerce company, but for us “thank you” season or January where people start to say “actually I’m going to do this all year round” is much stronger now, so we can come in at different aspects of this and compete in different ways because of this model. I think that’s quite unique because I don’t think anyone as yet is doing this in our space.”
JE: “For us, it’s all about maximising lifetime value and ARPU, and we have all these little subscribers and, even within our subscription base, we’ve got people that we know are highly engaged so most of the time we use a basic frequency value model to judge engagement. We’ve got people who aren’t engaged enough, with a high risk of churn etc, but we also have these really loyal, ongoing subscribers that have been subscribers for 20 years plus, and what we’ve been looking at now is how do we provide them with more value but obviously monetise it at the same time. We’ve recently launched premium offerings, and so that’s a way we’ve really been trying to improve our revenue models and make them more loyal. We’re also in a privileged position with Investor’s Chronicle where we can market ourselves in that we can make people more money, and it is an investment in itself but that comes with challenges. For example, if you introduce a premium offering, you could upset all your people who thought they were already on your best package or that don’t want it or feel they’ve got things taken away from them, even though it was never included in their package to begin with. So we’re constantly trying to improve value, but value that we can monetise.”
VC: “We, in relative terms, haven’t been going very long, but in four years we’ve learned such a lot about our customers. We need to research what our competitors are doing, and how we can tap into all those different gifting options throughout the year which we previously didn’t do. So Valentine’s Day, Mother’s Day, etc, and we haven’t had the money to do big spends like advertising on tube lines or giving away free stuff, that’s not been an option for us so we’ve had to look at other ways. Collaborations have been key to growth as well so tapping into something else that’s not coffee but it’s got another user base that would use coffee. It’s so easy to think “oh those guys are doing it so much better than us”. Just subscribe to some other things, other products and see what they’re doing, and if you could apply that to your business and if that would be a benefit. I actually subscribe to our own coffee, so we have a subscription that comes to our house so that I get to experience what the customer experiences as well. So I think it’s about looking at different ways that we can grow our audience and not through giving away free stuff.”
In a sentence, what advice would you give to any business coming into this market, or even one that’s quite prevalent in this market? What’s one “do” and one “don’t”?
TW: Do – understand the unit economics of your customers early on and be able to predict it as soon as you can in terms of when they join – it’s been transformative to us. We’re a very financially literate marketing team and that means that we can just make decisions much more quickly.
Don’t – subscriptions are not meant to be a trick so be transparent.
VC: Do – have the right customer service behind your product and making that really accessible to your subscriber so there aren’t 10 pages to click through to find the email address just to talk about changing your grind. We’re here to help. We did adopt the TrustPilot and we’ve seen a huge benefit from that.
Don’t – stress about your competitor too much. Do what you know is the right thing and keep doing what you know is good and you’ll stand out from the crowd.
DZ: Do – try to articulate the valuable position in a no-brainer way.
Don’t – worry too much about people who don’t want a subscription. People have different life cycles in your membership – respect the natural life cycle your members go through and try to build a product that can provide a good service at any level of engagement.
JE: Do – be brave and go with a subscription model if you feel it’s right for your business because deferred revenue is such a valuable revenue stream.
Don’t – let the tanker ship lose course if you can help it: it’s so much harder to get yourself back towards your financial targets if you go off course. Recognise that you need to market differently in a subscription model, you can’t just rely on big ad campaigns once or twice a year because you’re going to be losing subscribers every single day. You need to have those always-on channels that are constantly topping up.