“Why depend on unpredictable customers when you can turn them into automatic ones?” The Automatic Customer explores how subscription-based services transform businesses into stable, scalable enterprises.
1. The Subscription Revolution is Reshaping Business
The subscription model isn’t new, but it’s currently exploding in popularity across industries. Historically used by newspapers or cable TV, this model has resurfaced due to shifts in consumer habits and technology. Customers, especially younger ones, prefer access over ownership, from music to transport.
The main driver for this shift is the “access generation” – customers who value convenience more than possession. Pair this mindset with the growing comfort online users have with secure payment methods, and businesses find subscription services much easier to implement. Data plays a key role here, as companies offering subscriptions can gather valuable information to tailor their services precisely.
Companies like Amazon have fully embraced this trend. Amazon Prime, for instance, not only offers video streaming but changes shopping habits. With free shipping or exclusive deals, Prime customers are convinced to keep buying directly through Amazon. This new loyalty often puts nearby stores and competitors at a disadvantage.
Examples
- Apple introduced Joint Venture to support businesses transitioning to Macs, sold through annual fees.
- Microsoft shifted from selling physical software boxes to its prefered subscription-based Office 365.
- Amazon Prime's grocery service, AmazonFresh, rivals Walmart by charging annual fees for home-delivery convenience.
2. Subscriptions Create Stability and Long-term Value
Subscriptions do more than make money—they create predictable revenue streams for businesses. For investors, the appeal lies in stability. Regular payments, even in small amounts, can surpass random one-time profits over time.
Recurring revenue makes it easier to plan ahead. Businesses don’t need to guess demand as accurately, resulting in optimized inventory and operations. This regularity also ensures more reliable purchasing behavior because payments tend to process on schedule automatically. Additionally, subscriptions offer businesses resilience, even through tough economic times, as customers prioritize core services they trust.
Trust is fostered through the subscriptions' recurring nature. For example, a home security service charging monthly for monitoring builds relationships over time. These customers often expand their spending on related services, deepening loyalty and profits.
Examples
- Home security businesses secure recurring income through constant monitoring fees.
- Gym memberships inherently entice regular usage, locking in loyalty.
- SaaS companies, like Salesforce, thrive through scalable, predictable revenues.
3. Consumables and Surprise Boxes Drive E-Commerce Subscriptions
In e-commerce, businesses often succeed by offering consumables or themed surprises. Consumables are items customers need to replenish—like razor blades. A great example is Dollar Shave Club, known for its quirky branding and steady delivery.
Surprise box models engage by sending unexpected goodies based on interests. Bark Box, specializing in dog toys and treats, keeps its customers excited about each month's unique bundle of pet products. While fulfilling recurring needs, such models simultaneously add an enjoyable element of discovery.
Managing these models can be challenging. Coordinating vendors, keeping the experience fresh, and handling logistics require streamlined operations. Still, businesses like Conscious Box succeed by curating natural brand samples while upselling full-size versions online.
Examples
- Dollar Shave Club personalizes men’s grooming supplies with fun names like “The Executive.”
- Bark Box delivers continuously exciting dog-care surprises monthly.
- Conscious Box markets eco-conscious health food sets alongside secondary sales.
4. Communities Are Built Through Private Clubs and Network Effects
Companies that want to foster connected customer bases should consider the private club or network strategy. A private club offers exclusivity to wealthier subscribers who desire special status and connections. People value exclusivity as much as service.
In contrast, businesses like WhatsApp thrive through network dynamics, where the service improves with added users. Customers themselves actively recruit others as every new member enhances overall value. Businesses starting these networks focus regionally to grow before connecting larger audiences.
Be mindful that growth via community feedback or advocacy can cut both ways. A good buzz propels growth, but dissatisfied customers—like former World of Warcraft players—can harm reputation significantly.
Examples
- Joe Polish’s Genius Network charges $25,000 annually to join exclusive entrepreneur meet-ups.
- WhatsApp flourished as friends invited others to become subscribers for maximum communication.
- Zipcar expanded city-by-city rather than nationally to avoid overwhelming initial users.
5. Simplified Lives Sell - Focus on Ease and Reliability
Offering peace of mind is powerful. Simplifier models excel at saving customers time and stress. Hassle Free Home Services manages mundane repairs for clients with recurring needs. It creates a routine for customers while allowing cross-selling during face-to-face interactions.
Peace-of-mind subscriptions, meanwhile, protect against rare but difficult situations. Services like pet tracker Tagg monitor beloved animals, alerting owners instantly if pets wander off. The assurance alone keeps customers committed.
While personalization improves satisfaction, businesses should calculate margins carefully. Charging enough per subscription guarantees viability—especially critical for sporadic-demand fields like pest control or maintenance.
Examples
- Hassle Free Home Services handles small, regular repairs proactively, winning trust over time.
- The Mosquito Squad schedules automatic sprays without customer reminders, ensuring bug-free zones.
- Pet trackers build emotional customer loyalty beyond tech-related needs.
6. Content Platforms Flourish with Memberships and Libraries
For content businesses, membership sites or unlimited-access libraries can thrive. Membership models work well for niche topics or business improvement. Entrepreneur-focused ContractorSelling.com demonstrates how valuable clients perceive insights tailored to their industry.
Meanwhile, libraries like Spotify's streaming offer broad content for a fixed price. Although media giants dominate this space, smaller firms like New Masters Academy craft affordable libraries teaching specialized subjects like art. Both approaches capitalize on convenience.
Creativity in the digital interactive era means businesses can package knowledge effectively, introducing pricing tiers or group benefits for maximum flexibility.
Examples
- ContractorSelling.com helps tradespeople boost revenue strategies.
- DanceStudioOwner.com teaches management until being acquired by apparel giant Revolution Wear.
- Spotify, adored for music accessibility, leads music subscriptions globally.
7. Elite Services Cater to Priority Seekers
Priority services use the front-of-the-line model. Subscribers seeking faster responses or services naturally pay higher premiums. Counseling services, such as Thriveworks, ensure appointments within 24 hours. Salesforce onboards enterprise customers similarly by queue-jumping for premium packages.
Treating VIPs well distinguishes basic customer service from premium layers—ensuring elite-tier buyers feel valued yet retaining fair public reputations.
Examples
- Travelers skipping TSA lines bypass stress with airport clubs' annual options.
- Software lines prioritize preferred paying clients exclusively at Salesforce.
- Thriveworks guarantees same-day counseling appointments upon demand.
8. Measuring Success Requires New Metrics
Subscriptions force companies to adopt fresh performance signals. Seeking net profit too early overlooks future payout potential. An accepted standard suggests acquiring customers should remain one-third their lifetime value.
Instead of tracking profits instantly, use alternative metrics like customer retention or renewals. Since promotional offers or free trials delay immediate benefits, reinvesting profits or raising outside funding becomes highly strategic.
Examples
- Basecamp pooled project resources into early software platform performances.
- Venture capital-backed startups prioritize aggressive subscriber scaling initially.
- TIGER 21 simplifies billing structure upfront yearly membership dues.
9. Building Trust Converts Hesitant Buyers
Enticing customers wary of subscribing takes creativity. Price comparisons highlighting huge savings—rather than modest cuts—help. Trial periods remove barriers, such as paying smaller commitments first.
Adding exclusivity or leveraging automatic recurring value eases doubts further. Subscriptions reliably establish themselves once customers see the tangible experience worth what they’re paying.
Examples
- Osler Bluff Ski Club's $2500 trials reassure luxurious club doubters before opting yearly.
- Prepaid streaming discounts grow loyalty by motivating frequent platform engagement.
- Unique fee-only consulting firms' exclusivity attract proven industry clients eventually.
Takeaways
- Evaluate how your unique product or service can be converted into subscription offerings to grow loyal users.
- Rethink outdated financial models to align realistic subscription pace expectations across profitability horizons.
- Create trial samples removing attachment risks while demonstrating emotional daily benefits earned mutually alongside better outcomes.