If you’ve noticed a growing number of subscription-based services popping up around you, you may be on to something. Subscription-based services are making a comeback in a range of industries, and you may begin to see the same in the FinTech industry soon.
In the past, companies that have been the first to shift to subscription-based models in a given industry have elicited some initial skepticism from customers and experts. Yet, many of these companies have proven themselves and shown great long-term potential. Based on these companies, here’s why I think that the subscription model has proven to be so successful, and why I know that Cinch is onto something:
Subscription Services Meet Customer Needs:
80% of companies have noticed a change in the way that customers want to access their goods and services. Trends show that customers now want products and services on-demand, and they absolutely don’t want to deal with hassle. A subscription-based service meets this need perfectly for a few reasons. First, the model removes the need for a customer to make a purchasing decision. Instead, customers receive everything at their door before they actually require the product. Second, subscriptions allow customers to foresee and maintain their budget. There are no surprises each month.
Nothing is Truly Free:
Customers make a lot of tradeoffs to receive free services and apps since the companies that provide them still need to make money somehow. In the FinTech space, one way companies make money is by selling access to your personal financial data. Subscription-based services are allow companies to move away from this potentially shady practice. They also put power back into the hands of the consumer.
Let’s take a look at a few companies that have successfully pioneered a subscription model in their respective industries:
Netflix is a great example of a company that listened to their customers and adopted a subscription model. The company initially rented and sold DVDs. They kept their ear to the ground and evolved to an unlimited subscription model because they realized that’s what their customers truly wanted. The company added about 7 million customers in the fourth quarter of last year.
Spotify, the music streaming service, now has over 40 million paying subscribers. They recently acquired Preact, a company that uses data analytics and behavioral science to find insights and trends that correlate with paid subscriptions. Subscriptions now make up the majority of the company’s revenue generation, despite the company’s use of a freemium model that shows ads to users that don’t pay.
Dollar Shave made it big when Unilever bought the company for $1 billion last year. They did something no other company had done previously in the shaving industry. They used a subscription service to sell blades, shaving cream, and other items at a reasonable price. In addition, they built a strong brand by providing their customers with shaving tips and other clever tidbits through a “Bathroom Minutes”
Amazon Prime was Amazon’s first time venturing into subscriptions, and they nailed it. Last year, Jeff Bezos reported 51% year-over-year growth in paid memberships, and estimated that they had 40 million subscribers to Prime.
The Boston Globe is the perfect example of a company leading the way in subscription models. The newspaper industry is in financial trouble, yet may of the large monopolies have demonstrated very little innovation to address this problem. The Globe pushed forward with a subscription-based model, and now sells about 65,000 digital-only subscriptions. This is more than any other regional paper in the U.S. The company’s core strategy is about creating unique and quality content that allows them to charge and be successful.
In Cinch’s case, charging the user, makes Cinch directly accountable to the user. At the end of the day, they work for you – and no one else. Subscription-based apps have much higher retention rates in the long term, likely because their user and customer are the same audience, as opposed to a traditional lead generation model where the true customer is the one paying for the referrals or advertising. This means the company continuously improves the product or app based on customer needs. Charging also allows the Cinch’s customer to have the assurance that they won’t be targeted by any spam or ads – Cinch doesn’t rely on that as a source of revenue. Finally, charging means that Cinch will be around for the long haul to serve you. Having a long-term way to make revenue allows the company to do this.
Some customers might be highly engaged, and others may use Cinch’s app less often. Regardless of their circumstance, customers have the satisfaction of knowing that they’ll always have access to their personal CFO when they need the service, and as they need it.
Wouldn’t you rather pay the incremental subscription cost, and know that in the long-term you’re avoiding high interest purchases, saving money, ensuring your privacy and so much more?