User Experience using Subscription services

08 Apr 2022

Popular Articles

What is a “Subscription” service

Subscription is an amount of money that you pay regularly to be a member of an organization or club (1). Generally, a subscription allows us to, – instead of paying fully for a certain product – rent the product for a period of time, in which the rental duration ends after we decided to cancel the subscription payment.

Generally, a company uses a subscription-based business model when they are focusing on customer retention over customer acquisition. The point of creating a subscription-based business model is so that a customer can make periodical payments instead of one large upfront payment. Generally, using this kind of business model increases the Lifetime Value of a customer. (2)

Before continuing the topic, there is a term called Subscription Boxes. Subscription boxes, the purchase of a monthly set of often customizable or surprising items that are mailed to the end user, have exploded in the marketplace, growing at an annual but steady rate of more than 100% over the last five years (Chen, Fenyo, Yang, & Zhang, 2018). There are many large companies absorbing and implementing the Subscription Box Service (SBS). Though some companies thrive with their SBS performance, some other companies fail to perform up to their expectation, which leads to believe that a company needs proper managerial skill in order to perform in the SBS Landscape (3)

There are 4 frameworks in the 4C of SBS (Subscription Box Services) which are: Categories, Consumer Benefits, Customers, and Competitive Landscape. Though there are advantages in having an SBS, generally people like the fact that SBS basically reduced the consumer decision-making efforts. Unlike memberships, consumers are not obligated to pay to become members of a business where they can use the services freely, instead they become subscribers to services which directs them to access boxed-based offerings. Commonly, SBS consumers are not bound by long term commitments, unless they chose annual over monthly pay. (3)

There are many factors that makes a subscription-based business model very advantageous. The very first advantage a subscription-based model provides is that it attracts many customers. The reasoning behind this model attracting more customers is because of the appeal it brings in hindsight. The entry fee to a product is much more accessible since they charge “bite-sized” prices instead of large sum of price on one sitting (e.g., getting charged $10 monthly instead of a one-time $100 deal). The second advantage is that it is easier to provide your customers an example of what your products are. Creating free trials in order to attract customers to buy your subscriptions are an easier way to attract customers. (4)

After discussing over what subscription-based business model is generally, and also discussing over the advantages of owning a subscription-based business, now I will be covering the technologies generally needed for executing said business model. The first technology that are commonly found in many subscription businesses are a “recurring billing system”. This recurring billing system automates the fee charge to a customer by retrieving their credit (and in some cases, debit) card info and sending the bill over to their account. Only when the customer decided to cancel the subscription, is when the company cuts the billing. The second more important after payment is the “Payment Recovery System”. It is not an uncommon event when a customer credit card declines. Usually what will happen is that, when the system detects that the customer fails to pay their bill, the system will automatically send a message to notify the client over the failure of payment. (5)

Generally, a customer would choose a subscription service over others because they would have experienced an entire month worth of service before paying. Other than that, subscription-based services are generally convenient and easy access. (6) “If we just look around, we can see that consumers value convenience and time and are willing to pay for it. This is evidenced by the explosion of services that eliminate daily hassles from our lives – we now can get our groceries delivered, meals planned and delivered (we don’t even have to select the ingredients), whole outfits delivered without ever picking out the clothes or even browsing a website,” said Veronica L. Thomas, Associate Professor of Marketing at Towson University and expert in consumer psychology. (7)

Based on personal experience, subscriptions are generally helpful in boosting the quality of life. Easy access over quality services, not getting ads every few minutes, getting priority attention from businesses and many more to come. Having subscriptions is as addicting as ever, with their “bite-sized” payments making things easier for people. A simple example would be a spotify subscription where we could pay a monthly IDR 60.000 to not receive ads, download music to play offline, create multiple playlists, and listen to music-on-demand. On hindsight it may seem like it’s not worth the money, but when you have little access to the internet, all of a sudden offline music sounds really helpful and handy. Same deal with premium package delivery services, you can either wait 7 days for your perishable package to arrive to your desired destination, or you can pay IDR 300.000 a month to receive discounts, faster delivery, and priority handling by their couriers.

So, in conclusion, it seems that subscriptions are made for customers to spend a smart amount of money, by not blowing their cash in a one-time payment, but instead pay a monthly fee of a significantly smaller price. Other than that, subscriptions also seem to help boost the general quality of life and also overall handy if used by the right person.

Hadrian