How to Win in Consumer Subscription: Efficiency and Cumulative Advantage

How to Win in Consumer Subscription: Efficiency and Cumulative Advantage

In the ever-evolving world of consumer subscription, there are certain patterns and strategies that successful companies have adopted to stay ahead of the game. By examining these commonalities, we can gain valuable insights into what it takes to thrive in this competitive landscape.

One of the most prevalent patterns observed among these companies is an obsession with efficiency. Regardless of their size or industry, these companies prioritize staying small, keeping costs down, and achieving profitability. They understand the importance of staying lean until they find strong product-market fit, and in many cases, even beyond that point. By staying small, they are able to develop hacking skills and foster a growth culture within their teams.

For example, at Noom, a leading subscription-based company, the founders kept the team size under 10 and worked long hours in a one-bedroom apartment in San Francisco. Every outgoing dollar was scrutinized, and the growth marketer was responsible for all spending decisions. This obsession with efficiency helped define the growth culture at Noom and contributed to their success.

Similarly, when Future, another prominent player in the consumer subscription space, started their journey, they recognized the need to keep their team size and cost structure small. This allowed them to fund years of patient development and growth, while also ensuring they had the resources to showcase the game-changing nature of their connected coaching service.

It is worth noting that the founders of the biggest B2C subscription companies are often immigrants. Noom and Grammarly's founders hail from Ukraine, Duolingo's founder is from Guatemala, Calm's founder is from the U.K., and Spotify's founder is from Sweden. This highlights the diverse perspectives and innovative thinking that immigrants bring to the table, further fueling the success of these companies.

While efficiency is a common thread, another key aspect of winning in consumer subscription lies in understanding and leveraging the concept of cumulative advantage. This idea, also known as the Matthew effect, explains how those who start with an initial advantage relative to others can retain that advantage over long periods of time.

To illustrate this concept, consider a simulation where two people start in nearly the same place. However, one person has a 20% initial advantage. As time goes on, that initial advantage amplifies, resulting in a significant difference in their final market share. This experiment demonstrates the importance of starting conditions and how they can have lasting effects on long-term outcomes.

Accepting luck as a primary determinant in our lives can be a liberating way to view the world. Realizing the magnitude of happenstance and serendipity allows us to stop judging ourselves solely on outcomes and instead focus on our efforts. This aligns with the principle shared in Stephen Covey's book, "The 7 Habits of Highly Effective People," which emphasizes focusing on what we can control rather than what is beyond our influence.

It is crucial to remember that while some of us may be born with more advantages than others, and some with fewer, it should never define how hard we try. We should not let good luck put us on a pedestal, nor let bad luck knock us down. By acknowledging the role of luck in our lives, we can maintain a balanced perspective and continue to focus on our efforts.

To navigate the world of consumer subscription successfully, here are three actionable pieces of advice:

1. Stay lean and efficient: Embrace the mindset of staying small, keeping costs down, and prioritizing profitability. This allows you to stay agile, develop hacking skills, and focus on revenue over growth until you find strong product-market fit.

2. Embrace cumulative advantage: Recognize the role of initial conditions and how they can shape long-term outcomes. Rather than becoming discouraged by the advantages or disadvantages you may have, focus on putting in consistent effort and leveraging opportunities along the way.

3. Focus on what you can control: Instead of fixating on external factors beyond your influence, concentrate on the areas within your control. Direct your energy towards improving your skills, making strategic decisions, and consistently delivering value to your subscribers.

In conclusion, winning in consumer subscription requires a combination of efficiency and an understanding of cumulative advantage. By staying lean, embracing the concept of starting conditions, and focusing on what we can control, we can position ourselves for success in this dynamic landscape.