While tackling first time with Growth Marketing in the summer of 2017, it was my first few months in CAREEM. We started building an amazing team whom are agile, super hardworking , jack of all trades but master of serious some…
While competing with a giant, a.k.a UBER; with loads of money, resource and technological advantage, we were trying to find the area how we can pull the competition to a place where we can bring our abilities like David did to Goliath.
Having competition on new user acquisition from digital and other marketing channels , activating them with aggressive offers trying to retain and increase their usage needs huge amount of subsidisation and budget. More over you spent super high amount of time while doing this super detailed marketing despite you have a good automation or not.
Why then we preferred to move to subscriptions or packages in Ride Hailing ?
The answer is not so simple as Subscriptions has loads of benefits. Today I am going to start summarising some pros and cons of Subscriptions and why especially in the era of 2020 you should start experimenting it for your products.
ADVANTAGES FOR THE CONSUMER
- One of the core reasons is the Millennium and Z Generations consumption habit change compared to X and Y. Ownership is something that is not cool. People do not own things any more, they subscribe and use and drop when ever they want. They do not want to own cars that’s why they are using Ride Hailing , Micro Mobility. Same for not owning a DVD Player, they have Netflix
- Emotional. Being part of the gang, club, clan, team… It is cool. You don’t have Netflix, people will possibly stare at you, right ? As a company you also start building a relationship with your customer
- Operational Hassle elimination. Easy cancellation, simple policies, returns, getting rid of one off payments all the time, guarantees etc. You click, you try for a week, month, few months. Even cancel without payment. Most of the time entry price is lower, that makes smoother acquisition of consumer
Fixed amount of payment for a service you know. You know what to pay. It is always same day, same time being charged to your card or bank account
ADVANTAGES FOR THE COMPANIES
- More Revenue. Period. Not in the short run, but in the long run. You can predict your revenue forecasts better as well as slowly increasing better margins. ROI always increases. Compared to your standard models such as transnational way of making revenue, subscriptions requires less marketing effort and budgets to grow your KPIs. You can even cross sell with partner marketing and increase additional revenues. Ex: Buy a package get delivery free.
- Higher LTV. Period. Telling your investor that you have 15–20% paying subscribers per month and the LTV is + xUSD, makes more impressive start to any of your pitch while asking for a second round of Investment.
- Higher Retention rates. The subscribers for rolling 30 days calculations is always over 98% despite the few churned. Better retention rate, better word of mouth, less marketing spend and also scaling users to higher subscription models is way easier.
- Customer Acquisition Costs (CAC) decrease. It is way much lower compared to standard transactional users. While acquiring a user with an offer to do one ride in Ride Hailing, you can now be more aggressive and push a user to buy a 10 ride package which gives you a activated and 10 trip rider rather than 1.
- Better Segmentation. There is a huge advantage of clustering the users and trying make them move to higher segments via different packages. also you can suggest personalised and premium offers as well. This leads to less cancellation and better recommendation and referral. Amazing set of offerings for multiple segments is expected with your teams’ creative abilities.
- Decrease in Tech Efforts. Not in the first months while you are building features like new UI, payment diversification and much less hassle for big release cycles. First you build the core Subscription , then you can tweak it. If you can put 30–40% of your customer base to these products, Tech will need to have less problems in terms of resource allocation.
- On the other hand the subscription models are needs pampering and baby sitting all the time with properly analysing your data. I highly recommend give responsibility to a small squad with PM, Growth Hackers, Engineers and CRM resources so they are autonomous and doing everything by them self to increase the value given to the customers and create a lucrative segment which needs attention.
Your team should continuously need to learn and iterate. One example was Auto renewals due to product cycle was delivered late when we were delivering packages in Careem. After the Auto Renewal life much easier for both us and customers.
Here are some of the articles that I tried to curate from my search on Web and Medium to continue reading and lets discuss together…
· Rise of Subscriptions and the Fall of Advertising
· What If Universities Offered Subscriptions?
· The Subscription Business Model Will Fail, Here’s Why.
· 7 benefits of the SaaS subscription software model
· Are Subscriptions The Only Revenue Model For SaaS?
· Paid Subscriptions Built Directly Into Verasity
· Why You Should Use a Subscription Business Model
· Why 2020 is the year of subscriptions
· Subscriptions: The Next Frontier In Environmental Sustainability
· The 5 Benefits of Subscription Services
· 5 Tips for Growing Your Subscription Business
· 5 Reasons to Offer E-Commerce Subscriptions
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Consultant of Growth & Product Marketing
Former VP of Growth Careem