Thursday October 21, 2021
In the battle for customers
More and more products come by subscription
Streaming services for films and music such as Netflix and Spotify began. There are now even subscriptions and flat rate offers for cappuccinos and diapers. This is well received by consumers. But subscriptions are also a double-edged sword that doesn’t always pay off for customers.
For a long time there were subscriptions mainly for newspapers and magazines. But that has changed. Whether music, films, groceries, diapers or luxury accessories – more and more products are now available as subscriptions or flat rate offers. The management consultancy Kearney speaks in a study of a “new era of the subscription economy”.
The pioneers were streaming services for films and music such as Netflix and Spotify, which have now secured large parts of the market, but also electronics and software companies such as Apple and Microsoft. But now more and more startups are emulating them with subscriptions for everyday products – the “Abo 2.0”.
In fact, there hardly seems to be anything that is not currently offered by subscription somewhere. For example, the Frankfurt startup Lillydoo offers diapers and baby supplies by subscription every few weeks, and the Berlin company Mornin ‘Glory sells razor blades the same way – and saves you having to go to the drugstore.
Other subscription providers rely more on the fun factor. The Berlin startup Fobe, for example, rents out luxury handbags from Dior, Gucci, Prada and Co. in a subscription package for 79 to 99 euros per month. Every two months, the customer receives a new model. Surprise packages with wine or perfumes can now also be subscribed to online.
“It’s about convenience”
For the marketing expert Martin Fassnacht from the business school WHU in Düsseldorf, the attractiveness of “Subscriptions 2.0” is easy to explain. “It’s about convenience. With the music flat rate, I pay once a month. I no longer have to think about what it will cost me every time I use it,” he explains. With subscriptions for consumer goods, regardless of whether it concerns groceries, razor blades or diapers, the customer not only saves himself from having to keep shopping lists but also the trip to the supermarket. “And maybe he’ll even get a discount.”
The management consultancy Kearney comes to a similar conclusion in its study, for which 2,700 consumers in Germany, France and the USA were questioned: “Cheaper prices and convenience are the most important sales arguments.”
How successful subscription models can be is shown not least by the cooking box provider Hello Fresh, which regularly brings its subscribers home prepared ingredients for lunch or dinner – including cooking instructions for preparation. Last year the company was able to more than double its sales worldwide, to 3.75 billion euros. This year, the cooking box provider expects an increase of around 50 percent.
Subscription models are now much easier to cancel
The attractiveness of flat rates has now also been recognized beyond the Internet. The Espresso House coffee shop chain in Germany now offers coffee and cappuccino flat rates for caffeine lovers. And in Berlin, a car wash system offers vehicle enthusiasts a flat rate that enables them to wash their vehicles on a daily basis at a reasonable cost.
Even the top dogs in the consumer goods market cannot escape the trend. After Gillette had to experience that subscription startups like the Dollar Shave Club were stealing market share from him, the razor giant turned around – and is now luring with its own subscription offers. And Amazon has jumped on the bandwagon and offers a variety of products from olive oil to toothpaste by subscription – and promises lower prices for them.
In its ranking of the 100 most valuable brands worldwide, “Best Global Brands 2020”, the management consultancy Interbrand came to the conclusion that subscription models played an important role in the business model of more than half of the fastest growing brands – including the top three Apple, Amazon and Microsoft. According to the marketing expert Fassnacht, what is important for the success of the new generation of subscriptions is that they are usually much easier to cancel than previous versions. “That’s the only way it works,” says the marketing expert.
Which does not mean that the subscriptions are always worthwhile for customers. “Flat rates and subscriptions are a double-edged sword,” says Fassnacht. “They are convenient, but many consumers also overestimate their own use and end up paying more money than without such a commitment.”