Can you remember a time before Netflix, Hulu, Spotify, or any of your other favorite subscription-based services? Chances are you can’t, or maybe you just don’t want to. The model of subscription-based pricing is truly a holy grail for both the customer and the provider. The customer gives the provider recurring revenue every month without demanding they regularly reinvent the wheel. The provider delivers a long-term, stable, and appealing service that customers love. An endless library of movies, all of your favorite songs, a monthly box of meat delivered right to your door; what’s not to love?
Subscription and membership pricing and services are becoming more popular because there’s so much to love. At the same time, there are pitfalls to avoid in this quest for the holy grail. To help you look more like Indiana Jones and less like Monty Python, I spoke with Robbie Baxter, a strategy consultant who’s actually worked with places like Netflix and the Wall Street Journal. You can listen to her Onward Nation episode here.
Robbie loves subscription-based revenue generation. She also sees the big problem with the subscription pricing extravaganza: people want to own things, not pay for them month-to-month. You don’t want to lease the car; you want to buy it. The counter to this is what Robbie calls the membership mindset. The crux of it? Make your subscribers feel like members, not customers.
The membership mindset is the cure for “subscription fatigue” that a lot of consumers experience. Basically, you first want to make sure your business model will give your customers value in the long term. As Robbie tells us, even car washes can have a subscription service. The key thing to remember is that people don’t want a membership for getting their car cleaned; they want a membership that means having a clean car.
All kinds of companies can provide subscriptions, from construction companies that lease their cranes to software companies selling their products as monthly services. These companies provide a product that their members need in the long term, AND they are constantly innovating, updating, and collaborating with their members to increase subscriber satisfaction and maintain retention. No more dropping out after 60 days. A membership mindset means keeping customers for the long term.
That kind of innovation and collaboration can be hard, I know. It’s WAY harder when you’re stuck with the wrong customers. Before implementing models like this, it is so important to have an image of your ideal customer. Who do you want to serve, and who would you like to avoid? Robbie recommends drawing a line down a sheet of paper and using it to separate your dream clients from the ones you wouldn’t touch with a ten-foot pole (sounds eerily similar to a concept I talked about here). You’ll have a better understanding of who you want to work with. You’ll be able to niche down. And you’ll enjoy working with these ideal clients a lot more, especially since you understand what they want and can innovate properly to keep up with their changing needs.
Robbie puts it in a hilarious perspective: you don’t walk into a McDonald’s dressed up in a tuxedo or gown and ask them for their finest champagne. Likewise, if a customer came to your winery and asked for a Big Mac, you’d tell them to scram! Take a page from that playbook. Know your audience and make them the best darn wine (or Big Mac) they’ve ever had. Give them so much value that they can’t help but come back each month. In no time, you’ll have a list of subscribers who love your service and can’t wait to see what’s in store.