Getting The Power Of Subscription Commerce?
A financial daily recently interviewed us about the trend called: subscription commerce or subcom. Will it make companies more predictable and profitable? Is it a trend or a hype?
You might have seen brands and businesses trying to get recurring revenue streams based on serving monthly packages of food, beauty, clothing and other products?
The so-called subscription commerce market is expanding rapidly, so what’s behind the trend and why are consumers signing-up?
Subcom services have members who pay a monthly fee to receive some type of box each month, and yes I will give you several examples below.
But let’s start with the why. Why do I personally love subscription commerce?
Because I do believe in a meta trend in marketing that is pushing CMOs towards making their businesses more predictable and profitable, and that marketing will be more and more about:
• How many customers and relationships do we have?
• What is the economic value of one relationship for our company?
• How can we create predictive markets and use adaptive modeling?
• How can we increase our ROI, revenues, profitability and shareholder value?
So I think that subcom could fuel above objectives in several brand – product categories.
Take for example a company like Amazon. Very CRM driven and very predictable in their business model. A model that might be extremely helpful in economic downtimes, but also in normal economies a very shareholder friendly model.
So Amazon is already part of this space and because they don’t push subscription very hard yet, they could reach scale and velocity any given Sunday with their powerful client base.
If 100 million Amazon customers all spend $100 per year, that makes it a very predictable company. And nice or safe “buy” for potential shareholders that are looking for the “best buy”.
And Amazon could easily sell subscriptions for books or other products if they want to increase their ARPU…
In my Telecom period we were all about ARPU: Average Revenue Per User. If you had i.e. 20 million mobile subscribers as Telco company, and were able to increase ARPU by i.e. 4%, you were talking about a massive monthly increase of revenues.
If you next grew your customer base 5% that year, pulling high ARPU customers through the funnel, shareholders would love and reward the company for that.
This ARPU thinking is in my DNA, and it might be another reason why I would like to inspire you to look at subcommerce seriously.
As an example I would like to show you some data around a company called Birchbox. The start-up delivered 4-5 cosmetic samples in a box. Every month 45.000 members are paying Birchbox $10 for this service.
$450.000 Monthly revenues and $5,4 million in a first year, not very bad for a start-up, right? And pretty predictable and safe for investors.
At the start of subcommerce, it looked like most start-ups were female-focused. But during my research I discovered many male subcom opportunities as well.
And of course, a subcom service for new contact lenses or vitamin packs could be beneficial to both male and female audiences.
Or how about a monthly subscription to baby diapers? That could benefit families, single-moms, single dads and even grandparents…
Okay promised you some subcom examples for inspiration.
If you are as inspired by subcommerce as me (or should I say obsessed), you will probably love below infographic by Kissmetrics as well:
Perhaps the most powerful thing at subcommerce might be consumers. They tend to buy 99% out of habit. So that might be the leading insight to consider your subcom opportunities?
And in the era of social networks, interest channels and viral spread, how would your subcom program grow if it was embraced by a few real opinion leaders and super influencers?
Or how would you like to extend both reach and relationships at the same time? That could be increasing the ROI on your media investments a lot, right?
To me, a few things are sure about subcom: several start-ups will fail. More subcom companies will make very serious money and a few will be acquired by the Amazon’s of this world.
Several brands and business could use subcommerce to fuel their future predictability and profitability.
What About You?
How do you feel about subscription commerce? Trend or hype? I’d love to discuss it with you in the comments below.
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About the Author
Igor Beuker was CMO at 3 listed companies, chairman at the IAB, jury member at Webby, AMMA and Esprix awards, founder of 3 digital agencies (sold to WPP) and global chief social officer at Mindshare. Now he is ‘freejack’ consultant and a sought after keynote speaker.
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