Unfortunately I messed up the link for the AngelList Confidential conversation when this post went out to all subscribers. Here's the correct link to the video recording: https://vimeo.com/456778040/130bfb1cda
had a small question about subscriptions: why do annual subscriptions only work by paying the complete amount upfront? (It could maybe have a simpler answer, but I haven't found it yet)
Iām a little late to the party... but the post still was very informative and well put composed. This makes me very excited for the future of this great business model and business as a whole. One of the next areas I believe may be disrupted with this business model in the future is transportation, via robotaxis possibly sold in a subscription of some kind. What are some areas that you are most excited about?
Great post! For me, subscriptions are all about automation and intentional spending, which then allows me to better automate my saving/investing. One of the open questions for me is whether or not subscriptions actually make sense for products with more fixed/upfront costs. At ClassPass it was obvious we had to charge users on a recurring basis because our corresponding costs were recurring. If you look at something like Calm or Todoist, more software only products, it's a little less clear why those payments have to be recurring. Sure there are new content/feature and data/warehouse costs (plus employee salaries), but in many cases I would rather pay 3-4x an annual membership fee in a one time payment just so I can feel like I actually own the thing, which then allows the company to get out of the dreaded churn game altogether. I'm surprised we don't see more companies pressure testing the assumptions being made there and running the experiment themselves.
Nikhil thanks for the great analysis and I look forward to the next one on subscriptions. Subscriptions seem to have become the Holy grail to build resilience to shocks through recurring revenue. It's definitely an increasingly dominant business model, you are more than right! The only concern is that too much focus on subscriptions can be misleading especially for non-tech businesses. Subscriptions are not for everyone and not the solution for everything.
I've listened the last earnings call of Nike a few days ago and they are starting to talk and act like a SaaS business. Starbucks has had a similar path in the last few years. I believe that subscriptions or not subscriptions the next 5-10 years are going to be the era of the SaaSification of all sort of industries. The winners of the new reality are the ones that understand how the secret formula today is to follow a set of go-to-market mantras pioneered by the SaaS industry in the last 20 years.
Following the mantras of Saasification doesnāt mean necessarily moving 100% of a business into subscription, or even launching subscriptions at all, although there is still a lot of room for subscription models ...
Today all businesses should know they are a SaaS business. If not it means they donāt realize it yet. I'm having fun sharing news and writing about this topic on substack if you want to have a look.
Great post, Nikhil. It helped me to stop and think more about it. Hope you don't mind me sharing it here for your thoughts.
It seems that asking if we are reaching subscription fatigue is just the wrong question. Subscription in itself is not a product/service. Before the subscription, there is a job to be done by the real product/service. Analyzing the job being done sheds some light into which subscriptions will likely thrive and which will fade. The acid test: is the subscription perceived as a convenience to receive the real job done by the product/service, or does it represent an onus?
Traditional retail banking that charges monthly fees is unarguably a subscription, and it has been for ages. Neo-banks are demonstrating that they can do the same job without the onus of a subscription.
Greenlight, a fintech that offers a debit card for kids, hit the spot with a subscription. The real job is to make parents' lives easier to control how much and where their kids can spend money. Subscription adds to the convenience of paying for this service.
BlueApron (and the likes) partially succeed at the job of delivering food but fails to eliminate the burden of cooking. Allured patrons are led do believe that cooking gets magically effortless, but it doesn't = high churn. But it explains why BlueApron experienced a rebound during COVID: food delivery was the real job new customers were looking for during the scary times. BlueApron will inevitably resume fading as we get more used to the new normal and shift to other options to get the "food delivery job" done, the subscription will be perceived as an onus.
Your post also prompted me to think that subscriptions have second-order effects. For example, subscriptions promote inertia, which explains why we don't reevaluate all our tv on-demand subscriptions monthly. Subscriptions could represent an emotional commitment, which explains why so many people continue to subscribe to a gym even if they don't use it.
Anyhow, thanks for the nudge! I cannot wait for parts 2 and 3.
I think subscription fatigue does exist, though it's probably smaller than it's made out to be and I would define it differently. The fatigue is around having to pay for something in eternity for a service that you would rather own. While owning content is not viable any more as an alternative for a Spotify or a Netflix, subscribing to an office 365 is not as much of a slam dunk when not much 'new' content or functionality is coming outside of safety updates. So the fatigue might be around too many services rushing to the subscription model where the value just isn't there. But yes, subscriptions are here to stay in general and they are also a great way for customers to try new things without investing heavily upfront
Wonder if there is also a connection between the boom in adoption of D2C / consumer products subscription and a rise in dual income households. Certain subscriptions like meal kits, kids toys, Amazon Subscribe & save for CPG stuff etc help save time and shopping for these was typically a chore traditionally handled by the woman
Unfortunately I messed up the link for the AngelList Confidential conversation when this post went out to all subscribers. Here's the correct link to the video recording: https://vimeo.com/456778040/130bfb1cda
Hey Nikhil,
had a small question about subscriptions: why do annual subscriptions only work by paying the complete amount upfront? (It could maybe have a simpler answer, but I haven't found it yet)
Iām a little late to the party... but the post still was very informative and well put composed. This makes me very excited for the future of this great business model and business as a whole. One of the next areas I believe may be disrupted with this business model in the future is transportation, via robotaxis possibly sold in a subscription of some kind. What are some areas that you are most excited about?
Great post! For me, subscriptions are all about automation and intentional spending, which then allows me to better automate my saving/investing. One of the open questions for me is whether or not subscriptions actually make sense for products with more fixed/upfront costs. At ClassPass it was obvious we had to charge users on a recurring basis because our corresponding costs were recurring. If you look at something like Calm or Todoist, more software only products, it's a little less clear why those payments have to be recurring. Sure there are new content/feature and data/warehouse costs (plus employee salaries), but in many cases I would rather pay 3-4x an annual membership fee in a one time payment just so I can feel like I actually own the thing, which then allows the company to get out of the dreaded churn game altogether. I'm surprised we don't see more companies pressure testing the assumptions being made there and running the experiment themselves.
Nikhil thanks for the great analysis and I look forward to the next one on subscriptions. Subscriptions seem to have become the Holy grail to build resilience to shocks through recurring revenue. It's definitely an increasingly dominant business model, you are more than right! The only concern is that too much focus on subscriptions can be misleading especially for non-tech businesses. Subscriptions are not for everyone and not the solution for everything.
I've listened the last earnings call of Nike a few days ago and they are starting to talk and act like a SaaS business. Starbucks has had a similar path in the last few years. I believe that subscriptions or not subscriptions the next 5-10 years are going to be the era of the SaaSification of all sort of industries. The winners of the new reality are the ones that understand how the secret formula today is to follow a set of go-to-market mantras pioneered by the SaaS industry in the last 20 years.
Following the mantras of Saasification doesnāt mean necessarily moving 100% of a business into subscription, or even launching subscriptions at all, although there is still a lot of room for subscription models ...
Today all businesses should know they are a SaaS business. If not it means they donāt realize it yet. I'm having fun sharing news and writing about this topic on substack if you want to have a look.
www.saasification.net
Great post, Nikhil. It helped me to stop and think more about it. Hope you don't mind me sharing it here for your thoughts.
It seems that asking if we are reaching subscription fatigue is just the wrong question. Subscription in itself is not a product/service. Before the subscription, there is a job to be done by the real product/service. Analyzing the job being done sheds some light into which subscriptions will likely thrive and which will fade. The acid test: is the subscription perceived as a convenience to receive the real job done by the product/service, or does it represent an onus?
Traditional retail banking that charges monthly fees is unarguably a subscription, and it has been for ages. Neo-banks are demonstrating that they can do the same job without the onus of a subscription.
Greenlight, a fintech that offers a debit card for kids, hit the spot with a subscription. The real job is to make parents' lives easier to control how much and where their kids can spend money. Subscription adds to the convenience of paying for this service.
BlueApron (and the likes) partially succeed at the job of delivering food but fails to eliminate the burden of cooking. Allured patrons are led do believe that cooking gets magically effortless, but it doesn't = high churn. But it explains why BlueApron experienced a rebound during COVID: food delivery was the real job new customers were looking for during the scary times. BlueApron will inevitably resume fading as we get more used to the new normal and shift to other options to get the "food delivery job" done, the subscription will be perceived as an onus.
Your post also prompted me to think that subscriptions have second-order effects. For example, subscriptions promote inertia, which explains why we don't reevaluate all our tv on-demand subscriptions monthly. Subscriptions could represent an emotional commitment, which explains why so many people continue to subscribe to a gym even if they don't use it.
Anyhow, thanks for the nudge! I cannot wait for parts 2 and 3.
I didn't know about Angelist Confidential. Thanks for sharing this and the next year I will attend.
Hello Nikhil, Do you think people using EMI or credit cards for shopping have a higher tendency to opt for subscription based services ?
Who are the immediate potential customers for a subscription based service in terms of lifestyle behavior of people?
Would love to know your thoughts!
I think subscription fatigue does exist, though it's probably smaller than it's made out to be and I would define it differently. The fatigue is around having to pay for something in eternity for a service that you would rather own. While owning content is not viable any more as an alternative for a Spotify or a Netflix, subscribing to an office 365 is not as much of a slam dunk when not much 'new' content or functionality is coming outside of safety updates. So the fatigue might be around too many services rushing to the subscription model where the value just isn't there. But yes, subscriptions are here to stay in general and they are also a great way for customers to try new things without investing heavily upfront
Wonder if there is also a connection between the boom in adoption of D2C / consumer products subscription and a rise in dual income households. Certain subscriptions like meal kits, kids toys, Amazon Subscribe & save for CPG stuff etc help save time and shopping for these was typically a chore traditionally handled by the woman