So far in this eight part series titled "8 Reasons Subscribers Are Better Than Customers," we've seen how subscribers boost the value of your company, increase the life time value of a customer and smooth out demand. Today, we look at how the subscription business model gets you closer to your customers--for free.
In a traditional business, the customer buys your product or service once and it is up to you to try and convince them to buy again in the future. You often have no idea if they liked what they bought and what would have made them buy more so you're left having to guess or invest in costly market research.
In a subscription business, you have what I call "Automatic Customers" who agree to purchase from you into the future as long as you keep providing your service or product. Through the research for my new book, I've discovered there are nine different subscription models that are leveraged by everyone from accounting firms to art teachers to better understand their customers.
Long term, direct relationship
Unlike a transactional business model, subscribers are opting into a long-term, direct relationship with you. You know who your customers are and which of your products and services they use, so you have a much better understanding of their preferences than an industry competitor relying on a traditional business model.
A subscription business gives you a direct relationship with your customers and an ability to track their preferences in real time. It's how Netflix knows what television series to produce next and how Amazon figures out what products their Prime subscribers are dreaming of buying next.
But you don't have to be a sophisticated media giant or billion dollar e-tailer to track customer preferences through the subscription model. Take a look at subscription-based ContractorSelling.com, run by Joe Crisara. In return for a fee of $89 per month, you can subscribe and get information, tips, and advice on how to run a successful contracting business. Plumbers and electricians subscribe to ContractorSelling.com for Crisara's insight, and as they start to read articles and contribute to the forums, Crisara can see what's on his subscribers' minds.
That's important because Crisara also makes money from conferences. Seeing which articles are most popular and controversial among his members gives Crisara insight that helps when he's picking speakers and topics for his live events.
For $20 a month, Conscious Box offers a monthly selection of hand-picked, natural, GMO-free goods to try. Conscious Box asks subscribers what they think of the products in each box--and rewards them when they respond. Each product review earns 10 points, and 100 points earns the subscriber $1 to use in Conscious Box's online store.
Conscious Box then offers the manufacturers of the samples a custom online portal where marketers can see how Conscious Box subscribers rated each product. Conscious Box CEO Patrick Kelly told me that between 5% and 20% of subscribers rate each sample, giving both Conscious Box and its partners critical customer feedback.
Conscious Box uses the data to select merchandise for its online store and prominently display the products customers like best. (About 10% of Conscious Box revenue comes from online store purchases; Kelly is looking to grow this side of his business.) Product manufacturers use the insights they gain from Kelly's panel of early-adopting, eco-friendly consumers to pick winners to sell through the company's other channels--no focus group required.
One of the hidden benefits of turning customers into subscribers is the ongoing, direct nature of a subscription relationship, which means you can watch and ask your customers for feedback, ensuring they stay subscribers and buy more over time--the key drivers of value for your subscription business.
This article is adapted from the new book The Automatic Customer by John Warrillow. The book is published by Portfolio, an imprint of Penguin Random House, and is available wherever books are sold. Copyright John Warrillow, 2015.