Evaluating subscription marketing and sales models for physical products

               It may seem that every new product ad found on the internet today offers a discounted product if you sign up for a subscription (that you can cancel immediately). This marketing and sales format exploded over the last five years to lock in customers as a recurring revenue stream. According to a survey by Manifesto Growth Architects, 70% of business leaders view subscription business models as key to their growth prospects. It’s clear that these models work for both sellers and customers in the software space, where customers need consistently use these products and sellers can turn access on / off relatively easily. For physical products, the outlook on subscription is murkier. While the sales model is certainly appropriate for certain products, others may not lend themselves quite as easily.

I believe the key considerations revolve around 3 areas: the frequency and consistency of purchase, the difference in convenience, and the characteristics of the target demographic. It is well known that more frequently purchased items are more appealing to subscribe, but many companies fail to account for the consistency of purchase. As an example, if products are used at different rates (i.e. shampoo) a traditional subscription might not be convenient for a slower (or faster) than average user. Convenience is also frequently mentioned as a driver of subscriptions. Companies should carefully assess the level of increased convenience against alternatives (including proactive digital marketing). Finally and most critically, the traits of your target customer must be taken into account. As an example, some demographics can become overwhelmed when faced with managing too many subscriptions. Assessing these three areas can help companies better determine whether marketing through a subscription model is truly the best option for success.