In the twentieth century, the subscription business model essentially belonged to magazine and newspaper publishers. As these publications have shifted their presence to be primarily online, and it has become easier to get the news for free, the type of businesses we think of when we hear “subscription” has also changed. Subscriptions can get consumers past online pay walls, or they might still deliver physical goods, or they might offer a set price for access to goods or services the consumer would otherwise have to pay for individually. The entire thinking around subscriptions and what they can get consumers has evolved.
Millennial consumer habits have radically altered the way businesses market themselves and the way they sell their products. Now more than ever, we live in a subscription economy, and the success of the most lucrative subscription businesses has depended on a multitude of factors, such as the quality of the service and the way the service is marketed.
Subscription giants like Netflix and Amazon may seem like overly ambitious models for small subscription start-ups to emulate, but because subscription services are in such high demand, newer businesses can also carve out some of the success for themselves.
Let’s explore the ways that honing a specific service and making smart decisions about product packaging and labeling has resulted in such a wide variety of subscription services, from luxury care packages to discounted shipping.
A Brief History of the Subscription Model
In the seventeenth century, subscription publishing was a higher-end publication model used to distribute works like atlases and history books to wealthy patrons who paid ahead of time. The author of the work would often print his or her subscribers’ names in the front of the book as a way of acknowledging their financial contribution. In some cases, the subscription publication model produced sizeable literary works. For example, John Milton’s Paradise Lost, listed over 500 subscribed patrons.
In the United States, monthly publications such as Harper’s and The Atlantic gained popularity in the 19th century, and by the early 20th century, the new mass media era resulted in specialized news and culture publications reaching millions of subscribers. However, the 21st century has seen a complete overhaul of how people get their news, and overall magazine subscriptions have declined. There’s an argument to be had about the death of print, but the subscription model is certainly not dying with the print magazine; it has simply taken root elsewhere.
Amazon, that behemoth of e-commerce and cloud computing, launched its popular paid subscription service, Amazon Prime, in 2005. For $79 a year, subscribers had access to free two-day shipping and discounted one-day shipping on all eligible purchases. In 2012, Prime also started including free video streaming. The price rose to $99 in 2014, the same year that Prime unveiled Amazon Music, which provides unlimited free music streaming on millions of songs. Since 2014, Prime has been announcing added services to its package multiple times each year. Amazon, having been founded in 1994 as an online bookstore, has grown to surpass Walmart as the most valuable retailer in the United States and the largest internet company by revenue in the world, in large part due to the successes of the Prime subscription.
The Streaming Service
As exemplified by the popularity of Prime streaming, one of the most popular forms of subscription service today is the streaming service, which generally provides unlimited streaming of movies, TV, music, or some other form of media. Here are some of the streaming services that have defined how contemporary consumers think of subscription services.
Netflix. With 103.95 million subscribers worldwide as of July 2017, it’s funny to think that Netflix offered to be acquired by the now defunct Blockbuster in 2000 and was turned down. That was the same year that Netflix dropped the single-rental model and switched over completely to a subscription model. As DVD sales began to decline after 2006, Netflix’s business continued to grow as they invested more in streaming services. Finally, cementing its position as a media giant, Netflix debuted the TV series House of Cards in 2013, beginning a new era of original programming distributed by the streaming service.
Netflix is a great example of a company that puts the emphasis on its subscribers rather than on its products. Having converted almost entirely to a streaming service, it’s odd to remember that Netflix started in the ‘90s as a DVD rental company. Subscribers are attracted to Netflix because it offers a convenient way to consume media fast. The company recognized this was their strength and stuck to it rather than clinging to outdated technologies.
Spotify. Spotify is a music streaming service and longtime competitor of Apple Music that has gained huge popularity with young listeners due to the convenience of a subscription service rather than a single-purchase model. Spotify has faced criticism from huge names like Taylor Swift, who claim the streaming services do not fairly compensate the artists whose music it streams. Whether Spotify’s model of compensating artists is sustainable remains to be seen, but as of right now the convenience and cost efficiency of not having to pay for individual songs makes it a huge threat to other music streaming services.
The Care Package
In an era where people have become so used to making their purchases online, subscription services that deliver a physical product have found a way to differentiate themselves from the impersonal feel of online shopping. Millennials like to treat themselves, and these subscriptions feel like curated care packages sent to them on a regular basis without them ever having to reorder (provided, of course, they make the payments). Part of the excitement of these care package subscription services is the feeling of receiving a gift, as the subscriber does not know exactly what will come in the box when it’s delivered.
Furthermore, with some services that offer samples of brand names at a better value, customers get to try out multiple products before ordering the real thing. These subscription services deliver the physical options of a retail location to subscribers’ doorsteps.
Beauty boxes. The cosmetics industry has taken the subscription business model by storm with notable services like Birchbox, Ipsy, and Play by Sephora. Birchbox pioneered the business idea, debuting their $10 a month beauty boxes in 2010 for women who want to sample makeup products before buying them without having to go to the store. Birchbox’s founders have agreed that a large part of their appeal is their beauty box’s gift-like appearance; people who subscribe to Birchbox look forward to receiving cosmetics hand-picked just for them in a carefully designed package.
Geek and Fandom boxes. These subscription services are for hardcore fans of just about anything. They deliver “nerd gear” on a regular basis to subscribers who want to express their love for any given franchise through material goods. MySubscriptionAddiction.com, a website exclusively dedicated to advertising and reviewing subscription services, has compiled a list of the best geek subscription boxes, and they range from miscellaneous to highly specialized.
Specific Item Services
Similar to the care package model that promises convenience and personalization, specific item services are, as their name suggests, all about the product, where care packages are more about the experience. With these subscription services, customers know what they are getting, and the appeal stems from the removal of tedious shopping experiences. Yet again, the product packaging and labeling play a huge role in the success of the service. Consumers want to feel as though they are receiving a personalized, artisanal product. These subscription services follow this rule while delivering specific products.
Dollar Shave Club. The Dollar Shave Club deviates from the norm in that it strips its product of all branding. After all, much of name-brand razors’ price is a product of the brand’s perceived value. By producing generic razors, Dollar Shave Club can sell them at a fraction of the price. However, this doesn’t mean they haven’t considered the aesthetics of their subscription experience. Dollar Shave Club customers expect high-end customer service and packaging. So even though the subscription itself goes for as low as $1 a month, the company has been shockingly lucrative for its founders.
Manpacks. While Manpacks now offers men’s underwear, socks, toiletries, shaving products, and other basic needs, it started out simple and sold just underwear and socks. Targeting male consumers who are either too busy or too lazy to shop for these basic items (as well as female consumers who are buying for their male family members), Manpacks currently has more than 10,000 subscribers. While its offerings of basic men’s goods may not seem revolutionary, Manpacks was the first American subscription service to specialize in this category.
Vilago. This business is proof that a small business can make it among larger subscription service competitors, Vilago is a mother and son team working out of Colorado to send all-natural soaps in 100% green packaging out to their subscribers. The subscription model has allowed them to escape the already competitive market for artisanal soaps they would have encountered had they chosen to sell on Etsy or Amazon.
Do Subscription Models Work for all Business?
There is a staggering demand for subscription services, and certain luxury subscription services like Scrimption and Carnivore Club have been forced to start wait-lists to keep their distribution exclusive. Even niches that have been filled many times over are seeing more competitors as entrepreneurs think of new ways to create value.
However, there are scenarios in which hopping on the subscription service trend may not help a business. If the product or service a company is selling has not yet been perfected (or at least proven to leave customers wanting more), there is no reason to think that customers will want to set a recurring payment for that good or service. Furthermore, a culture of membership extends beyond a subscription pricing model. To keep customers hooked indefinitely, the service needs to evolve with customer desires.
How a Product’s Label Impacts Consumers’ Perceptions
The perceived value of a product depends on a lot on its packaging. With subscription boxes, the packaging is the first thing the customer sees and sets the tone for the overall experience. If the service is targeting a certain demographic, the packaging should reflect this choice and appeal to that population.
Business owners can use labels to identify their products as well as advertise their other products or services. Essentially, a label serves a miniature visual sales pitch to the customer as they receive the box in the mail.
Equally important is the brand accountability that a printed label can lend to a product. Customers may view products whose printed labels lack contact information as untrustworthy, especially with goods that are meant to be eaten or applied to the body. For such items, labels that lack an ingredients list may also turn off customers who want to avoid certain allergens or ensure they are buying ethically-produced merchandise.
While subscription business owners will want to provide a printed label for their products to establish a brand identity, they’ll need to identify the right type of label for the job.
With some products, labels should stay on for as long as possible, while customers remove the labels from other products soon after purchase.
Specific to subscription products that reach the customer via mail, labels need to hold up through the wear and tear of the shipping process.
For every bit of thought given to the product or service, an equal thought must be given to packaging and labeling.
After looking at the staggering list of subscriptions available on MySubscriptionAddiction.com, this corner of the market may seem completely saturated. However, many recommend the subscription model to budding businesses, as it offers an alternative to the already saturated online marketplaces and creates a steady cash flow. With a little innovation and a lot of attention to detail, new entrepreneurs can hop on this profitable trend in retail.