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GUEST COMMENT Get audience cut through: expert tips on how to grow your subscription business

Image: Fotolia

Image: Fotolia


Sanjay Manchanda is chief marketing officer at Chargebee

When Netflix announced earlier this year that it had lost close to a million subscribers between April and July, the reports were met by many with suggestions of so-called ‘subscriber fatigue’. Was this a sign that the subscription economy was slowing down? That consumers were beginning to turn their backs on subscription services as we emerged from a global pandemic?

Just a few months later, it was announced that Disney+ had surpassed Netflix for total subscriber numbers for the first time. And while the losses suffered by Netflix might be read by some as a sign of apathy among subscribers, the success of Disney’s rival streaming service fuels the notion that, in fact, the subscription market continues to excel — only now, with ever more fierce competition. 

The subscription market is ‘normalising’

Netflix’s leaking of subscribers certainly isn’t reflective of the subscription market as a whole. What we’re actually seeing is more and more subscription services entering the market every day, leading to new competitors cutting into the overall subscriber numbers of ‘legacy’ subscription services. Indeed, Disney is still a relatively new player in the subscription market (its streaming service was launched in 2019), while Netflix began streaming way back in 2007.

According to recent estimates by UBS Wealth Management and Bernstein, the digital subscription economy is predicted to be worth $1.5 trillion by 2025that’s more than double its value in 2020. Digital natives, who have never known a world without technology, are making subscription commerce the new normal — and there’s absolutely no reason to suggest that it will slow down. Instead of dramatic fluctuation, the market is simply normalising.

Expert tips for growing a subscription business 

Of course, few subscription businesses are in the vein of a global streaming giant like Disney or Netflix. Perhaps yours is a SaaS-based business that helps enterprises streamline their operations or an ecommerce business that has recently entered the subscription market. Either way, as the subscription economy normalizes and new competitors enter the market daily, it will become increasingly challenging for subscription businesses to fuel growth.

With that in mind, here are five ‘golden rules’ that will help your subscription business grow by staying one step ahead of its competitors in a rapidly-expanding market. 

Determine the best pricing strategy for your market

Setting the right price for your subscription service is never easy, but there are many options to experiment with: for example, businesses in a new market might take an approach called ‘skimming’, where you set a high price to capture clients who are willing to pay for the value you provide. Alternatively, you could opt for a more aggressive approach called ‘penetration’, in which you undercut existing competitors in your market — just be aware that you’ll need to be willing to sacrifice profit in order to drive acquisitions.

Recent trends have shifted towards usage-based and metered billing: this pricing structure is unique to the user and charges them based on how much (or how often) they use your service. Such an approach inevitably leads to greater customer satisfaction because users are charged for exactly what they use, so it’s often a great way to boost retention.

Emphasise customer retention

Acquiring new customers is essential for a new subscription service, but did you know failing to retain these acquisitions is the greatest threat to your model? Increasing customer lifetime value (CLV) should be a key focus, especially since a loyal customer can be worth up to 10x their initial purchase value. Not only that, but placing emphasis on retaining and monetizing existing customers is up to 7x more cost-effective than acquiring new ones.

Use ‘freemium’ or ‘trial’ strategies to drive acquisition

Freemium and trial strategies are powerful tools to wield at the very start of your subscription workflow. They cast a wide spotlight on your service, and they’re astute marketing strategies that get more customers through the door. The barrier to entry is zero, and you can work on acquiring paid sign-ups later down the workflow — the key is providing a seamless customer experience that encourages users to upgrade at the end of their free period.

Provide a flexible billing system

When customers request a change to their billing date, for example, this might be due to cash flow problems or even an issue with their preferred payment method. If you’ve built your own billing system, accommodating these requests can feel like a chore, but an automated billing solution will provide internal flexibility where requests like this can be granted almost instantaneously. It’s all about being utterly flexible to your customers’ needs.

Value the customer experience above all else

Retention is the ultimate marketing tool. If you’re able to delight your users through your product while prioritizing their customer experience, you’ll drive more referrals and generate word-of-mouth marketing. The key is making every interaction as seamless as possible: if a customer wants to pause their subscription, allow them; if they need to cancel, make the process simple; if they decide they want to reactivate their subscription, ensure they can do it with a single click.

In conclusion, it’s clear that — despite fears of ‘subscriber fatigue’ prompted by Netflix’s recent decline — the subscription economy is only continuing to thrive. And even as more and more players inflate an already crowded market, startups, SaaS companies, ecommerce stores (all of the above and more) have the opportunity to tap into an expanding subscriber pool. By following these expert tips, your business can survive and thrive using a subscription model.

Sanjay Manchanda is Chargebee’s chief marketing officer

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