Subscription Economy News

Apple doubles down on subscriptions

Apple doubles down on subscriptions

Excerpts from the article by Anthony Ha on TechCrunch

Let’s see if I can get this all into one blurb: There’s the streaming service AppleTV+, the updated TV app with Channels (basically, subscriptions for other services), a $9.99 subscription for Apple News+ (including Extra Crunch) and a gaming subscription service called Apple Arcade.

Oh, and beyond the subscriptions, Apple is working with Goldman Sachs and Mastercard to launch an Apple Card.

Read the full article on TechCrunch

Google’s Stadia looks like an early beta of the future of gaming

Google’s Stadia looks like an early beta of the future of gaming

Excerpts from the article by Tom Warren on The Verge

“The future of gaming is not a box,” according to Google. “It’s a place.” Just like how humans have built stadiums for sports over hundreds of years, Google believes it’s building a virtual stadium, aptly dubbed Stadia, for the future of games to be played anywhere. You won’t need an expensive gaming PC or a dedicated game console. Instead, you’ll just need access to Google’s Chrome browser to instantly play games on a phone, tablet, PC, or TV. It’s a bold vision for where gaming is heading, and Google hopes its Stadia cloud streaming service will make it a reality.

Google may have just unveiled the future of gaming at the Game Developers Conference (GDC), but it’s a future the company has left us knowing very little about.

Read the full article on The Verge

A month of coffee for $5? That’s Burger King’s plan to rule breakfast.

A month of coffee for $5? That’s Burger King’s plan to rule breakfast.

Excerpts from the article by Rachel Siegel on The Washington Post

Burger King’s newest discount is quite a whopper.

No, not that kind of Whopper.

The kind that gets customers to walk in and smell the coffee.

Burger King rolled out its own coffee subscription service: a cup a day for $5 a month. The chain is betting on the service to get early risers in the door — and away from other big names in the fast-food breakfast game.

The calculus is simple: Sell cheap coffee, sell more breakfast. If subscribers ordered coffee everyday of March, they’d pay roughly 16 cents per piping-hot cup. And while they’re at it, they might just pick up a breakfast sandwich or pancake platter on their way out.

“Fast food restaurants find ways to get some items that don’t necessarily sell well, and find attention-getting discounts to get people in the door,” said Jonathan Maze, executive editor of Restaurant Business Magazine. “This is a classic example of that.”

Fast food wars are, in part, fought over breakfast. Dunkin’ Donuts hooks customers with its coffee and doughnuts, and Starbucks obviously generates its own share of the morning coffee rush. When McDonald’s rolled out its all-day breakfast menu in 2015, sales sizzled. And it kept the momentum going — and its stock rising — by expanding its breakfast offerings over the next few years. In 2018, the company’s chief financial officer said the strategy was meant to “win back customers at breakfast."

At the time, the golden arch’s chief executive, Stephen Easterbrook, added: ““It’s very competitive out there at breakfast."

(Fast food is gritty competition: In 2018, Burger King offered customers 1-cent Whoppers if they placed an order within 600 feet of a McDonald’s.)

The fast-food industry as a whole has struggled with breakfast foot traffic. A February report from the market research firm Mintel said fast-casual restaurants would have to get creative if they wanted to attract customers beyond lunchtime, including through wider breakfast options in the morning or happy hour specials in the evening. The report said that only 6 percent of those surveyed mainly visit fast-casual restaurants for breakfast. That’s compared with 42 percent who said they mainly visited for lunch.

Read the full article on The Washington Post

Brandless launches subscription option

Brandless launches subscription option

Excerpts from an article by Corinne Ruff in Retail Dive

Brandless, a direct-to-consumer home essentials business, on Thursday launched a subscription option, CEO Tina Sharkey told Retail Dive in an interview. The startup, which launched mid-2017, ended 2018 with over 400 products in its assortment, and it plans to double its offering this year, Sharkey said.

The new service allows shoppers to receive certain products on a regular timeline of their choosing — weekly, monthly, twice a year or anything in between, Sharkey said. Each subscription box comes with a surprise gift.

Rolling out a subscription model is a convenience play for consumers who don’t want to think about reordering basics like paper towels, and it’s a savvy business move. It’s similar to Amazon’s popular Prime Pantry program, which has helped it outpace rivals in the household and personal care product spaces.

Read the full article in Retail Dive

How To Get Customers To Renew...And Expand Their Accounts

How To Get Customers To Renew...And Expand Their Accounts

Excerpts from the article by Taulli on Forbes

Tien Tzuo is one of the pioneers of the SaaS (software-as-a-service) industry. He was employee No. 11 at, where he became the Chief Marketing Officer. He would then co-found Zuora, which operates a leading subscription platform.

Yet while the SaaS model is powerful – and has transformed companies like Microsoft and Adobe – it does demand much planning and organization. This is why Tien crated the PADRE operation model, a workflow to help companies better manage the process. And an important part of this is renewals:

“Acquiring new subscribers is critical, but in the Subscription Economy the vast majority of customer transactions consist of changes to existing subscriptions: renewals, suspensions, add-ons, upgrades, terminations, etc.”

The bottom line is that implementing a strong system for renewals not only helps reduce churn but also allows for the opportunity for higher growth, in terms of expansion of existing accounts and upsells.

So what can you do to improve the process for your own company? Well, I reached out to another top player in the SaaS field, Zendesk. The company, which has a market cap of about $7 billion, provides customer service and engagement cloud services. During the latest quarter, revenues jumped by 38% to $154.8 million.

“The renewals process starts with one key question: who is responsible for the renewal?” said Jaimie Buss, who is the VP of Sales for Zendesk. “The answer depends on what type of product you sell. With top-down large enterprise sales, a more senior account manager will most likely need to handle the renewal, as the objective of those renewals will likely be to extend the contract to multiple years, products, and include contract restructuring and heavy negotiation. For the mid-market, renewal objectives are a bit more straightforward; that is, to extend the contract term, minimize contraction by selling other products, and reducing or removing the discount offered at the initial sale. In this case, renewals could be supported by the Success organization or a renewals specialist.”

Regardless, the key is that you need to be proactive. Waiting until a few days before the contract expires can mean losing business.

Here’s what Jaimie recommends:

  • 90-61 days before the renewal: You should begin the initial engagement. First of all, you want to confirm that the primary contact is still with the organization. Next, have a discussion about pricing, discount reductions and term length options. Then once you gather all the feedback, you should evaluate the potential growth of the account and the churn risk. "Churn risks should immediately be flagged and you should have all hands on deck: sales, success and sales engineers,” says Jamie.

  • 60-31 days before the renewal: This is when you get down to brass tacks. In other words, you want to confirm the contract term, pricing, billing frequency, and payment type. You will also want to confirm the paper process and timing of signatures with the customer.

  • 30-0 days before the renewal: The order should be processed and signed. “Once closed, a hand-off back to success or sales should occur if the renewal is driven by a renewals specialist,” said Jamie.

During this process, there are definitely some potential issues to keep in mind. For example, if you have an “auto-renew” option in the terms and conditions, the renewal specialist or sales person needs to coordinate with the collections team. If not, there’s the risk that a customer may receive an invoice during the contract negotiation! No doubt, this could be a deal killer.

Finally, there needs to be a clear-cut incentive structure for those people who are responsible for renewals. According to Jamie, it must be focused on expansion of bookings. And even if a customer does not want to add new subscribers, there should still be incentives to increase the term length, improve the billing frequency and reduce the discounts.

Read the full article on Forbes

Changing consumer behavior is the key to unlocking billion-dollar businesses

Changing consumer behavior is the key to unlocking billion-dollar businesses

Excerpts from the article by Jonathan Golden on TechCrunch

In the summer of 2012, I had just learned of a new service where a driver would pick you up in their own car, not a taxi or licensed town car. You’d be able to recognize the car by the pink mustache strapped to the front. I quickly downloaded the new app called Lyft and, intrigued, started to share it with others around the Airbnb offices.

Almost everyone gave me the same response: “I would never use it.” I asked why. “Well, I wouldn’t feel comfortable getting into someone else’s car.” I said, “Wait a minute, you are comfortable allowing others into your home and staying in others’ homes while you travel, but you don’t want to get into someone else’s car?” The reply was always a version of “Yeah, I guess that’s it — a car is different than a home.”

I was dumbfounded. Here was a collection of adventurous individuals — who spent their days at Airbnb expanding the boundaries of what it means to trust another person — but they were stuck on the subtle behavior change of riding shotgun with a stranger. I then had another quick reaction: this product was going to be huge.

Behavior shifts in consumer internet

Truly transformative consumer products require a behavior shift. Think back to the early days of the internet. Plenty of people said they would never put their credit card credentials online. But they did, and that behavior shift allowed e-commerce to flourish, creating the likes of Amazon.

Fast-forward to the era when Myspace, Facebook and other social networks were starting out. Again, individuals would commonly say they would never put their real names or photos of themselves online. It required only one to two years before the shift took hold and the majority of the population created social media profiles. The next wave included sharing-economy companies like Airbnb, Lyft and Uber, prompting individuals to proclaim they would never stay in someone else’s home or get into their car. In short order, times changed and those behaviors are now so commonplace, these companies are transforming how people travel and move about the world.

The behavior shifts were a change in socially accepted norms and previously learned behavior. They alone don’t create stratospheric outcomes, but they do signal that there could be something special at play.

Build an enhanced experience

Still, just because a product creates a behavior shift does not mean that it will be successful. Often, though a handful of loyal users may love them, there is ultimately no true advantage to these products or services.

One prime example comes to mind in the product Blippy. In late 2009, the team built a product to live stream a user’s credit card transactions. It would show the purchase details to the public, pretty much anyone on the internet, unlocking a new data stream. It was super interesting and definitely behavior shifting. This was another case where many people were thinking, “Wow, I would never do that,” even as others were happily publishing their credit card data. Ultimately there was little consumer value created, which led Blippy to fold. The founders have since gone on to continually build interesting startups.

In successful behavior-shifting products, the shift leads to a better product, unlocking new types of online interactions and sometimes offline activities in the real world. For instance, at Airbnb the behavior shift of staying in someone else’s home created a completely new experience that was 1) cheaper, 2) more authentic and 3) unique. Hotels could not compete, because their cost structure was different, their rooms were homogenized and the hotel experience was commonplace. The behavior shift enabled a new product experience. You can easily flip this statement, too: a better experience enabled the behavior shift. Overall, the benefits of the new product were far greater than the discomfort of adopting new behavior.

Revolutionary products succeed when they deliver demonstrable value to their users. The fact that a product creates a behavior shift is clearly not enough. It must create enormous value to overcome the initial skepticism. When users get over this hurdle, though, they will be extremely bought in, commonly becoming evangelists for the product.

Unlock greenfield opportunity

One key benefit of a behavior-shifting product is that it commonly creates a new market where there is no viable competition. Even in cases where several innovative players crop up at the same time, they’re vying for market share in a far more favorable environment, not trying to unseat entrenched corporations. The opportunity then becomes enormous, as the innovators can capture the vast majority of the market.

Other times, the market itself isn’t new, but the way the product or service operates in it is. Many behavior-shifting products were created in already enormous markets, but they shifted the definition of those markets. For instance, e-commerce is an extension of the regular goods market, which is in the trillions. Social media advertising is an extension of online advertising, which is in the hundreds of billions. Companies that innovated within those markets created new greenfield, but also continued to grow the existing market pie and take market share away from the incumbents. The innovators retrain the consumer to expect more, forcing the incumbents to respond to a new paradigm.

Read the full article on TechCrunch

Zuora stock soars in debut: ‘The inflection point of the subscription economy’

Excerpts from the article by Emily Bary on MarketWatch

Zuora Inc.’s management didn’t hesitate about their plans to take the company public even during a period of heavy market volatility, a move that paid off Thursday.

Shares of Zuora ZUO, +3.00% which makes software that helps companies transition to subscription business models, popped 43% in their first day of trading , closing at $20 after listing at $14. That opening price was above the company’s already-raised range. Zuora raised $154 million through the offering.

“Investors realize a bet on us is a bet on the entire subscription economy,” Chief Executive Tien Tzuo told MarketWatch. Zuora claims to have coined the term “subscription economy” to describe how more companies are moving to recurring-revenue models and trying to sell their products as “services.”

Tzuo, a Inc. CRM, -1.97%  veteran, said his company aspires to have the same long-term success as Salesforce, with aims to deliver 25% to 30% growth over an extended period of time.

He said that Zuora possesses “twin engines of growth” in its billing and revenue-recognition business lines. On the billing side, Zuora provides tools to companies that give them the option to bill customers through a variety of models, including a flat-fee structure or one based on volume. Tzuo believes Zuora is encouraging and enabling companies to think about their business model through the lens of providing services, giving the example of a guitar seller that now offers an app for lessons and bills monthly for it.

“Today marks the inflection point of the subscription economy,” Tzuo said. “Companies should not view business models as selling products but instead as selling services that we should subscribe to.” He cited Spotify Technology SA’s SPOT, -0.07%  recent listing as evidence that the movement has steam.

As for revenue recognition, “all accounting rules are changing for the subscription economy,” Tzuo said, and “it’s not going to get easier” to handle bookkeeping. Zuora offers services that enable businesses to recognize revenue under new accounting standards, which public companies were required to adopt by January.

Read the full article on MarketWatch

BMW and Lexus Launching Car Subscription Services

Excerpts from the article by Dana E. Neuts on Subscription Insider

More automakers want their share of the subscription economy.

Two more automakers – BMW and Lexus – have announced they want to get in on the subscription economy, each with their own version of a car subscription service. BMW first revealed their plans during the Detroit Auto Show, but details were not disclosed at that time. BMW has now launched its pilot program, called Access by BMW, an exclusive service that gives members unlimited access to their choice of BMWs for one monthly fee which includes insurance, maintenance, taxes, car washes, detailing, personal delivery by a concierge and roadside assistance.

For $2,000 a month, at the Legend tier, subscribers can select a vehicle from BMW’s M2, 4 series, 5 Series or the X5. For $3,700 a month, at the BMW M tier, subscribers can select an M car, including the M4 convertible, M5, M6 convertible, X5M or X6M. There is a $575 joining fee, but it is being waived for the program’s first 50 members. The program is currently being launched in Nashville, Tennessee, but could expand across the U.S. if it is successful.

According to BMW Blog, Access by BMW members will select their vehicle based from an iOS or Android mobile app, facilitated by local BMW dealers. A concierge will personally deliver the vehicle, fueled or charged, detailed and ready to go. The program requires a 32-day commitment. Daily vehicle upgrades are available. Access by BMW offers a few features that other car subscriptions are not yet offering: movement between subscription plans, pausing a subscription for a $200 convenience fee, and corporate memberships.

‘As customers continue to explore the growing mobility market, service-related offerings are becoming more in demand. With Access by BMW, our members will enjoy the freedom of personal mobility with access across a broad range of our highly emotional vehicles’ said Ian Smith, CEO of BMW Group Financial Services USA and Region Americas, in a news release. ‘Subscription-based services are of emerging interest for our customers, and we’re excited to be offering a mobility service to meet their individual and evolving needs.’

Read the full article on Subscription Insider

BMW's car subscription pilot program starts at $2,000 per month

Excerpts from the article by Jon Fingas on Engadget

BMW's car subscription pilot program starts at $2,000 per month

The rumors of BMW's American branch joining the car subscription craze were true. The automaker has launched a pilot Access by BMW program in Nashville, giving you a more flexible alternative to ownership that lets you switch cars as often as you like (through a mobile app, of course) without paying extra for maintenance. It's expensive like the Porsche equivalent, but that also means you're choosing from higher-end vehicles in lineup.

A 'basic' Legend tier starts at $2,000 per month lets you choose from the M2, 4 Series, 5 Series (including the 530e plug-in hybrid), and the X5 (including its PHEV model). Pay as much as $3,700 per month for the performance-minded M tier and you can drive the M4 convertible, M5, M6 convertible, X5M and X6M.

BMW stressed that this is a pilot, and thus an "opportunity to learn." There's a chance that Access could change if and when it spreads to other cities. However, we'd expect a wider launch to be more a matter of "when" than "if." Like other brands, BMW is adapting to an era where ridesharing and (eventually) self-driving cars will reduce the incentive to own a car. Instead of paying for maintenance or worrying about owning the 'wrong' car, you can just get the vehicle you want when you want it.

The Check Box: The Growing Need for Auto-Renewal Second Consent

Excerpts from the article by Lisa B. Dubrow, Esq., Dubrow & Bhonslay on Subscription Insider

Companies that sell products or services through subscription models need to keep in mind that there are numerous federal and state laws could impact how these models are structured and advertised. With recent legal settlements by major subscription brands as a bell weather, it might be time to revisit your auto-renewal policies and advertising to ensure you are not in danger of being held to these new legal standards. Lisa B. Dubrow, Esq. explains.

Read the full article on Subscription Insider

Why Subscriptions are the Future of B2B

Excerpts from the article by Bob Moore on Multichannel Merchant

The subscription economy has taken commerce by storm. From music and television to beauty and groceries, consumers have grown comfortable with storing their credit cards on file to receive products and services from brands they love on a recurring basis.

But what about B2B companies? The B2B e-commerce market may be estimated to reach $6.7 trillion by 2020, but complexities inherent in B2B operations have hindered branded manufacturers and distributors from fully reaching that potential – and from innovating on the customer experience at the same strength as B2C brands.

Enter subscriptions, which have fueled success for Netflix, Spotify, BirchBox and Blue Apron. With the right investments in subscription models, it’s time for B2B companies to learn from leading B2C brands and secure customer loyalty for the long term.

Put Customer Loyalty First

B2C companies were the first to remodel around customer behavior, garnering repeat customers through subscriptions. Dollar Shave Club revitalized the grooming industry when they boldly set out to sell bargain razor subscriptions online at a monthly cadence. With their model, Dollar Shave beat Gillette in the game of brand love and ultimately sold for $1 billion to Unilever, the largest ever M&A deal for a privately-held e-commerce company. More recently, GM launched a subscription-based concierge service in which users pay a flat fee for on-demand access to Cadillacs, bringing a fresh luxury spin to the world of driving.

Can the subscription model bring the same kind of magic to B2B brands? B2B companies notoriously struggle to compete for brand love – in many ways, an industrial dishwasher just doesn’t have the same allure of the hottest new iPhone.

But sometimes, loyalty has nothing to do with brand love. Instead, it can simply come down to the pain of switching who we buy from. From accounts to authorizations, B2B buying is generally more complex than that of B2C. Once a customer has identified a merchant that knows their needs and makes a product that works, the prospect of vetting and switching is all the more overwhelming.

Subscriptions alleviate that anxiety by simplifying the customer experience. In a way, B2B purchases already resemble subscription models – customers usually buy products from branded manufacturers and distributors on a regular schedule and in bulk. B2B vendors have the opportunity to automate those repeat transactions, solidifying customer relationships to make them “sticky” over the long term.

Read the full article on Multichannel Merchant