Commentary

Thriving In A Subscription-Based Economy: The UX Connection

For several years, we have seen a rapid movement from a traditional pay-per-product business model to a subscription-based one. Examples of subscription economy businesses permeate many industries—from entertainment (Netflix, Spotify) and fashion (Stitch Fix, Rent the Runway) to healthy living (Headspace) to dating (eHarmony) and meal delivery (Blue Apron, Home Chef).

In addition, companies that sell products find creative ways to deliver value by incorporating subscription components into their business strategies. Amazon includes a product replenishment option for a wide number of products (like coffee and diapers), and Apple now offers an annual iPhone upgrade via a monthly installment plan.

So what are consumers looking for from subscription services? Benefits sought commonly include lower upfront costs, flexibility (cancel any time), convenience (replenish regularly used goods automatically), scalability (subscribe to higher tier as needs evolve), and availability of the most up-to-date version of a product or service.  

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Subscription-based models are also attractive for companies that could benefit from recurring revenue and optimizing costs associated with initial customer acquisition. But success is anything but guaranteed. In the subscription world, the definition of success shifts from purely customer acquisition and sales (transaction-based, though this remains essential) to focusing on member experience, engagement and churn (relationship-based). Subscription companies need to meet a relevant need, establish and nurture meaningful relationships with the customer base and serve customers over time. 

With this specialized and demanding business model, companies must develop effective strategies for acquiring and retaining new members. User experience and ease of use, in particular, represent critical factors in successful acquisition, engagement and churn for subscription services. And while user experience is an objective considered during product/service development, it is not typically top of mind once a product is launched. Yet, one-third of consumers indicate they will lose interest if a product is not easy to use, according to our Consumer Life study. Just this one factor—ease of use—has a strong influence whether a person signs up and remains a member.

Furthermore, consumers who are open to subscription and who say they will lose interest if a product is not easy to use share certain characteristics. These consumers over-index on:

  • Annual household incomes of $100k+
  • Confidence about their financial future
  • Children under 12 in household
  • Interest in technology
  • Propensity to go out of their way to tell others about products and services they like

These consumers are financially lucrative, savvy and vocal. Consequently, ease of use is not just a high priority tactical issue, but also has important implications for acquisition and retention success in a subscription-based economy. Depending on the service value proposition, there are many ways companies can leverage ease of use to attract and keep valuable subscribers. Here are some examples: 

Save customers time.Employ artificial intelligence tools to minimize the number of steps required to complete tasks, identify relevant tasks to automate, offer shortcuts and personalize experiences. Optimizing on ease of use delivers faster and easier experiences that save time and, potentially, even delight customers. 

Give customers easy access. It is imperative that subscription services work across devices and operating systems, as well as offer seamless transition between devices (the ability to start a task on a smartphone, for example, and continue on a laptop).  Ensuring easy access maximizes opportunities for member use and enhances service relevance.

Make it easy for customers to learn. The importance of ease of learning a service is two-fold. There is a learning curve associated with initially using any service as well as discovering new features and benefits as a service evolves with changing market needs and expectations. The process of learning upfront and as a service evolves needs to be simple and intuitive, requiring limited effort from customers.  

How consumers think about companies is driven by the experiences they have across touch-points. In the subscription-driven economy, where consumer expectations are high and losing a customer is easy, optimizing ease of use becomes an especially important strategy for driving customer acquisition and retention. In the process, you can also elevate the voice of the customer, build meaningful experiences, and ultimately, drive growth.

1 comment about "Thriving In A Subscription-Based Economy: The UX Connection".
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  1. Peter Rosenwald from Consult Partners, December 11, 2017 at 1:55 p.m.

    An excellent 101 discussion of subscriptions and a recognition of the important trend towards subscriptions in many forms as a means of product and service sale and use.

    Many marketers don't realize that the profit dynamic and business model of subscriptions is very different from that of unit sales. I recently asked a room full of marketing professionals how many of them had subscriptions? Perhaps 20% of them raised their hands. Then I asked how many had Netflix? Almost all the hands went up. It took just a few seconds for the penny to drop; for these otherwise sophisticated marketers to realize that subscriptions were not just for magazines but could be profitably used over a broad spectrum of products and services. Is Microsoft 'selling' or allowing customers to 'subscribe' to software?

    What few understood was that they could with great accuracy determine how much they could afford to pay to acquire a subscriber and let that 'allowable' amount inform their marketing spend and that in the environment of 'big data'. they could achieve significant marketing efficiencies.  

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