1. 12 vital elements of the
Subscription Business Model
(for innovators)

2. From Simon+Kucher Consumer
Insights magazine, spring 2016 (pdf)
The subscription
business model
delivery products &
services on a
subscription basis.
And it has found its
way into everything
we daily consume.

3. Customer Business
1 Access to intangible assets: software, media,TV shows, music, movies,
ebooks, magazines, video,TV shows, games, Software as a Service (SaaS)
2 Access to durable goods: cars, bicycle, smartphones (with contracts)
3 Regular delivery of goods: newspapers, clothing, toiletry, consumer packaged
goods and any other consumer goods
4 Utilities: internet, phone contract, electricity, computing power, Infrastructure as
a Service (IaaS). Note, many utilities providers use a combination of subscription
business model and pay-per-use
1 1 1
Regular delivery of goods & services for recurring payment

4. (1) Value & quality
(2) Clear offers & fair pricing
(3) Convenient transactions
(4) Improve offer continuously
(5) Localise offering
(6) Personalise
(7) Build a culture of membership
(8) Make deeper connections
(9) Freemium to get started
(10) The right metrics
(11) Funding sources
(12) Cost structure
12 Vital Elements of the Subscription Business Model

5. (1) Provide value and quality
- Refrain from (purely) regurgitating the same-old
- Add exciting, industry-leading, price-winning exclusive flagship offers
- Amend your flagship offers with the same-old
Netflix: from DVD / streaming provider to producer of their
own exclusive shows

6. (2) Clear offer & fair pricing
- Make clear offers
- Avoid options-overkill (typically 3)
- Make the different pricing clear & fair

7. Foxtel (AU):
- 26 options —> overkill
- Disingenuous disaggregation of channels
- Massive price gap between entry and full package $26-$137
- Lock-in contracts: previously acceptable, now obsoleting

8. Netflix:
- 3 options only
- Differences are clear to understand
- Transparent and fair price range ($9-$15)

9. (3) Offer convenient transactions (example: Dollar Shave Club)
- Easy payment
- Any time: cancellation, upgrade, downgrade
- Skipping of month
https://www.dollarshaveclub.com/how-it-works

10. 1 Exclusively shows
(Amazon Prime TV)
2 Monthly “What’s
new” MS-Office
3 Varying recipes on
food subscriptions
(4) Improve your offering continuously:
- From big-bang product roll-outs to continuous evolution
- This has impact on your R&D roadmap and processes

11. (5) Localise your offering
- One size does (no longer) fit all
- More relevant offerings
“Narcos told Brazilians that Netflix
is paying attention to Brazil and
paying attention to talent we have
here. It’s also elevating local talent
to the world.”
https://www.bloomberg.com/news/
features/2017-01-12/netflix-wants-
the-world-to-binge-watch

12. (6) Personalise
- Create personalisable elements in your offering
- Higher customer engagement
- Soft switching barriers
myFT let’s you personalise
what you are interested in

13. (7) Build a culture of membership
- Increases direct network effects
- Increase loyalty & customer lifetime value

14. (8) Make deeper connections through values alignment
- Ambitious goal - bigger than profit making
- Deeper connection with customers
- No longer competing on price only
Blue Apron aims to build a better food system which.These foods are
then used in their subscription model recipes and food delivery

15. (9) Freemium: get started!
- As a means of trial
- To create a networked effect
- To serve as a marketing channel
Spotify: Freemium vs Premium

16. (10) Measure the right metrics
- Future recurring costs & revenues
- Customer lifetime value & Churn
http://www.slideshare.net/Zuora/zuora-always-on20123-saas-metrics-that-matter-12301579

17. (11) Funding sources
- Anticipate the moves of incumbents
- Expect imitators
- Have funding sources (cost of capital)
Spotify’s long slog to not-yet-profitability

18. (12) Cost structure
- Distribution, transaction costs, asset management, etc
- Sourcing / supply chain, infrastructure
- Differences/benefits to ownership offering
With reliable low-cost
distribution at no increased
piracy risk, monthly
subscriptions pricing
models were introduced
• Distribution: low cost via
fast-speed, broadband
internet
• Transactions: Direct
business to consumer
(intermediaries eliminated)
• Asset management: direct
licence, piracy control,
regular updates
Consumption-based pricing
was the legacy pricing
model for utilities enabled
by
• Distribution: low cost via
government-funded
infrastructure
• Transactions: business to
consumer (if privatised)
• Asset management:
consumer-owned assets
are to be purchased (e.g.
handheld, metering)
With location-specific,
wireless technologies, the
pricing model could be
extended to mobile
physical goods, incl cars
• Distribution: low cost
(compared to car rental);
location-specific
• Transactions: mobile, real-
time, business to consumer
• Asset management: GPS,
wireless, security, user
accountability
Utilities Software Car sharing

19. Amazon Prime is probably the
biggest subscription business model
on earth and it just got another
major boost …

20. The subscription business model is one
of the most promising business models
regardless if you work for an established
company or a young one.
We have free downloads for you to
develop your own innovation ideas
Click here to download:
www.InnovationTactics.com/
subscription-business-model-pdf