July 19, 2022

The Opportunities & Risks of Local Subscriptions

Michael Balyasny
Founder

This is the first of two posts that deep-dive into at the opportunities and risks of local, in-person subscriptions. Next week we’ll share a follow-up that explores strategies for experimenting with and launching successful subscription programs.

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Local subscriptions are a new trend and anything novel can feel a little scary. Today we’re weighing the opportunities and risks that subscriptions present for local, brick and mortar businesses.

The decision to launch a subscription offer depends heavily on the specific context and service model of your business, but many of the opportunities and risks apply to any type of business. As we explore you’ll see that the opportunities are very exciting, perhaps even transformational for local businesses, but the risks deserve serious consideration. Let’s dive in…

Opportunities

📈 Create deeper customer relationships.

📈 Drive customer growth through a unique value proposition.

📈 Grow with consistent, predictable cash flow.

📈 Encourage higher incremental sales.

📈 Increase visit frequency

📈 Create a frictionless experience.

📈 Collect data that delivers actionable customer insights.

📈 Increase your business’ value.

Subscriptions are an opportunity to build deeper, more frequent, and ultimately more profitable relationship with your customers. Done right, subscriptions align businesses and customers like no other model can.

Businesses get a commitment from a customer to use their products or services and essentially stop (or limit) patronizing the competition. The customer, in turn, gets a promise of greater value and a differentiated level of service. Subscriptions bring out the best in a business and its customers and provide long-term alignment.

For local businesses the impact of predictable, upfront cash flow can be transformational. The impact of seasonality or just the natural ebb and flow of revenue can put tremendous pressure on a small business. Subscriptions, even at just 5-10% of your total revenue can provide the buffer you need to invest more confidently and grow your business.

Subscriptions for in-person services have also proven to drive more traffic to your business, by a lot! When Panera first started piloting their in-person coffee subscription they saw a 70% increase in visits during their pilot program.

Risks

🤔 Subscription fatigue

🤔 Canibalization

🤔 Protecting margins

🤔 Increasing operational complexity

Subscriptions also come with risks that require careful consideration. We often hear about subscription fatigue and the risk of canibalization as two of the biggest concerns.

It’s true that some consumers feel that they have too many subscriptions. Online and software subscription models have been in the spotlight for a few years, particularly when it comes to media and entertainment. Bloated cable packages have been unbundled into subscription services like Disney+ and Netflix. Instead of one cable subscription we now have 3-4 streaming subscriptions and that can feel like a lot. The real story, however, is that consumers have benefited in a huge way and the evidence is obvious… nobody goes back to their cable bundle. Subscriptions allow consumers to get more of what they love and less of what they don’t.

Canibalization — is the concern that your best customers will buy an all-inclusive subscription and ultimately spend less. Protecting margins go hand-in-hand with the canibalization concern and are essential considerations in designing a winning subscription program. The good news is that while customers want value, they also understand that you have a business to run, in other words they’re not looking for a steal. The price of your subscription should be commensurate with the value you deliver, subscriptions are not giveaways.

The Path Forward

At bottom subscriptions are neither a silver bullet that leads to success or an inherent risk to your margins. Finding success requires an entrepreneurial approach and a shift in mindset from transactional wins to the lifetime value of your customers.

Being entrepreneurial means starting small, experimenting, and ultimately finding the winning formula. That’s what entrepreneurs do, and that’s why we’re so excited about the opportunity to partnering with local owners and operators to fulfill the transformational opportunities that subscriptions present.

We’ll share a post next week about specific strategies and tactics for launching, tweaking and scaling winning subscription programs. See you there!