Subscription has come a long way since the first newspaper subscriptions came to life in the 17th century. Actually, for many years, subscriptions were synonymous with newspapers, books, and magazines, as not many other industries made use of the business model.
This is an overview of the subscription evolution, which shows the incredible development that the model has taken, especially through the last 30 years.
Historically, in the 1990s, the subscription model was with an almost aggressive focus on acquisition. The goal was to target customers and lock them into a subscription that they would never leave. This was emphasized by binding periods, meaning that subscribers, often unknowingly, took on a legal obligation to subscribe for a long period of time. As a result, subscriptions were not very popular among consumers – mainly because of the missing transparency and especially, because they were so difficult to cancel.
By the time we reached the new millennium, other companies started to understand the value of recurring revenue and of having customers subscribe to a service, instead of buying products on a one-time basis. But they did not like the way the old subscription companies treated their customers.
As a result, the focus shifted to making subscriptions transparent and convenient for subscribers. The main difference from the previous paradigm then became to offer low prices and short commitment periods, instead of tricking customers into a legal obligation.
Netflix is one of the most famous companies that was born out of the Subscription 2.0 way of thinking. From the very beginning, Netflix insisted on making its subscription offer as attractive and transparent as possible. They were among the first to offer a 30-day free trial and, believe it or not, for many years, the “unsubscribe” button was placed on the front page of the website!
Throughout this paradigm, new companies and even new markets rose to power. Many tech companies changed their payment offer from one-time payments to offering their software with a monthly subscription and ongoing updates. This became the start of the software-as-a-service (SaaS) market – a market worth over $140 billion dollars today.
Subscription 2.0 works as the backbone of many subscription companies today and this paradigm managed to restore consumers’ faith in subscriptions. Especially younger consumers, brought up with these services love the convenience of subscriptions.
However, the issue for many subscription companies is the ability to distinguish themselves. The number of streaming services and surprise boxes has exploded and this has led some subscription companies to evolve even more.
While Subscription 2.0 moved the subscription movement far along, the focus was still on the product. But increased competition has led some subscription companies to focus even more on the consumer and the relationship between the company and the subscriber. For companies practicing what we call Subscription 3.0, the focus is on creating a strong user journey and putting the subscriber at the center of everything.
Subscription 3.0 companies often offer subscribers a lot of personalization, making them feel like they have their own, personal service. Also, these companies are known for offering excellent customer service, which helps them retain their subscribers.
Spotify was one of the first companies to move into Subscription 3.0. They offer a highly personalized experience, as well as the ability to share music and playlists with friends and family. In most cases, this approach will result in consumers being more loyal and more likely to recommend the service to a friend.
It is safe to say that Subscription 3.0 is a proven utilization of design thinking. Seeing the subscriber as the very center of your service, allows you to tailor your product to the consumer, instead of searching for a consumer that fits your product. This way, companies have a completely different focus from the start and can offer the most value for customers, at all times.
This is not to say that every single subscription company should switch to a Subscription 3.0 paradigm. Many companies practicing Subscription 2.0 are loved by consumers and have thriving businesses.
But if you are running a subscription company or planning to, then it is worth examining some of the instruments that Subscription 3.0 companies are using. Building a more personalized service and second-to-none customer service is never an erroneous move if you want to create a successful subscription business.
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