How to Win in Consumer Subscription: Strategies to Attract and Retain Customers

How to Win in Consumer Subscription: Strategies to Attract and Retain Customers

In the world of consumer subscription, where competition is fierce and customer loyalty is essential, companies need to go above and beyond to stand out and keep customers locked into their ecosystem. While a great product is undoubtedly important, it takes more than that to win over customers and keep them coming back for more. In this article, we will explore two key patterns that successful consumer subscription companies have followed and delve into six different strategies that can help lock customers into your ecosystem.

Pattern 1: Obsession with Efficiency

The first common thread among successful consumer subscription companies is an obsession with efficiency. From Noom to Grammarly, these companies have all prioritized staying small, keeping costs down, and achieving profitability. They understood the importance of staying lean until they found strong product-market fit and even beyond that. By keeping their team size under 10 and working long hours in a small apartment, they were able to develop hacking skills and ruthlessly prioritize their spending.

This obsession with efficiency helped shape the growth culture at these companies. For example, at Noom, the founders recognized that they needed to show the broader world the value of connected coaching at scale. To do this, they kept their team size and cost structure small, allowing them to fund years of patient development and growth. This strategy proved successful as Noom became one of the biggest B2C subscription companies.

The takeaway here is to stay as lean as possible and focus on revenue over growth, especially in the early stages of your business. By doing so, you can ensure that you have the financial resources to invest in long-term development and growth.

Pattern 2: Switching Costs

The second common pattern we observe in successful consumer subscription companies is their ability to create switching costs for customers. Switching costs refer to the barriers or inconveniences a customer faces when they consider switching to a competitor's product or service. By designing a superior business model, these companies have been able to lock customers into their ecosystem and make it difficult for them to leave.

Let's explore six different strategies that companies have employed to create switching costs:

1. 'Base Product & Consumable Trap': Companies like Nespresso, Gillette, HP, and Kodak have lured customers into their ecosystem with a base product and then profited from consumables that customers are forced to buy. This creates a dependency on the company's products and makes it harder for customers to switch.

2. 'Data Trap': Apple, Google Android, and Spotify are examples of companies that use the 'data trap' strategy. They encourage customers to create or purchase content and apps that are exclusively hosted on their platform. Switching to a competitor would mean losing access to this content, creating a barrier for customers.

3. 'Learning Curve Trap': Companies like Adobe, Salesforce, and Box understand that customers can be discouraged when they have to start over and learn how to use a new product. By designing products that are complex or require specialized knowledge, they create a barrier to switching.

4. 'Industry Standards Trap': Microsoft and Adobe have leveraged industry standards to create switching costs. When a company becomes the standard in a particular industry, customers are more likely to stick with their products due to compatibility issues or familiarity with the industry standard.

5. 'Servitization Trap': Rolls Royce and Hilti are examples of companies that have used the 'servitization trap' strategy. They not only compete with their products but also offer an entire experience to customers. Switching to a competitor means giving up the entire experience, making it harder for customers to leave.

6. 'Exit Trap': Verizon and AT&T employ the 'exit trap' strategy by forcing customers to use their products for a specified period of time as outlined in a contract. This contractual obligation creates a barrier for customers who may want to switch to a competitor.

By implementing these strategies, companies can effectively create switching costs and increase customer loyalty. Customers are more likely to stick with a product or service if they face barriers or inconveniences when considering switching.

Actionable Advice:

1. Focus on efficiency and profitability: Prioritize staying lean and keeping costs down, especially in the early stages of your business. This will give you the financial resources to invest in long-term growth and development.

2. Identify and leverage switching costs: Analyze your business model and consider ways to create switching costs for your customers. Whether it's through consumables, data, learning curves, industry standards, servitization, or contractual obligations, find strategies that make it difficult for customers to leave your ecosystem.

3. Continuously innovate and improve: To stay ahead in the consumer subscription space, you need to constantly innovate and improve your offerings. Listen to your customers, gather feedback, and iterate on your products and services. By providing a superior experience, you can further increase customer loyalty and reduce the likelihood of them switching to a competitor.

In conclusion, winning in consumer subscription requires a combination of efficiency and the ability to create switching costs. By staying lean, focusing on revenue over growth, and implementing strategies that lock customers into your ecosystem, you can attract and retain customers in a highly competitive market. Remember to continuously innovate and improve to stay ahead of the competition.