11 September 2019 1658 words, 7 min. read

Marketing strategy. The subscription business model is changing radically.

By Pierre-Nicolas Schwab PhD in marketing, director of IntoTheMinds
One more step towards consumerism. We are continually dematerialising property, and this time it is Nike that has gone one step further by offering a subscription for trainers. The Nike Adventure Club, currently reserved to the United States for children […]

One more step towards consumerism. We are continually dematerialising property, and this time it is Nike that has gone one step further by offering a subscription for trainers. The Nike Adventure Club, currently reserved to the United States for children aged 2 to 10, provides subscription packages of up to $50 per month and allows you to receive up to 12 pairs of trainers per year with promotional materials such as brochures, stickers, and so on… While Nike’s stated strategy is, of course, to retain increasingly volatile consumers from an early age, this form of recurring sales also raises questions in ethical and societal terms. In a world that lives on credit (financially and ecologically) is it acceptable to “push” people to consume in this way. Under the guise of necessarily fallacious arguments (encouraging children’s activities by providing them with new equipment), loving parents are drawn into a sales model (subscription) that relieves them of responsibility. However, the subscription business model has not always had only negative aspects. This is the subject of today’s article in which I wonder about the genesis of this business model and the forms it takes today.

The subscription, an old business model

The principle of a subscription is not new. The way to deal with it is.

The principle of subscription undoubtedly goes back to the principles of a membership, a business model, that allows the person who initiated it to ensure a regular flow of income and to ensure the sustainability of his business.

Casimir Christoph Schmiedel published in 1753 a book that was made of hand-coloured plates. Subscribers received a plate every now and then and bind them together to make a book after several years. It is believed that only 3 complete copies have survived.

While magazines have forged the subscription model, it should also be remembered that well before the magazines, books (including scientific books) were published on a subscription basis (then called membership) and several pages or pamphlets were sent to the subscriber each month or each year. This system was to continue for a long time, as William Sheriff Curtis, the famous American photographer, secured the income necessary for the publication of his monumental book on the Indians of the Americas through subscriptions.

In short, the subscription (or membership) ensured the creator of the financial income necessary to complete his work. To make a more daring parallel, we could compare the work of court painters to this model.  The latter placed themselves at the service of a protector who, by providing a regular allocation, ensured the artist’s loyalty and daily production (the subscription), with the difference that the very purpose of the subscription was often decided by the subscriber. Indeed, most often it is the “protector” of the artist who guided his work, ordering him this or that subject (often to his own personal glory). The relationship, perpetual, theoretically ended only when one or the other protagonist died.

The Camera Degli Sposi was painted by Andrea Mantegna when he was working for the Marquis of Mantova.

This type of continuous subscription no longer exists, even if I am aware of some exceptions:

  • The Mineralogical Record, an American trade magazine, proposed at its launch in the 1970s, for a large sum of money, that you receive the magazine for life. It was a bet on the future that paid off for those who took the risk.
  • At its launch, The Brussels Beer Project proposed a subscription system that would allow a certain number of bottles of beer to be received for life each year
  • American Airlines has offered lifetime subscriptions for unlimited travel. It has continuously gotten rid of “subscribing” customers after discovering how much they cost the company (see our account of this incredible mistake here).


The transition from the long-lasting object to the consumer object

The essential difference between then and nowadays subscriptions concerns the very essence of what is sold. Whereas objects sold by subscription more than 10 years ago were intended to be kept, today we consume by subscription.

The purpose of the subscription, then, was to build a collection of objects whose meaning was formed through the series they constituted. Today it is no longer a question of creating sense through subscription but only of making consumers consume and enslaving them through repetition.

Some collections have been built on subscription. It will be recalled that some publishing houses had specialised in this field, offering objects or books on a weekly or monthly basis. This type of marketing has helped to build publishing empires. The subscription model has also developed in a less “industrial” way to other collections. For example, some companies offered mineral lovers the opportunity to receive samples by subscription to complete their collection. It was from accumulation that the meaning of collection was born, the search for exclusivity. The search for quality and aesthetics will have put an end to this collector’s model, which still exists in other fields, such as philately.

The business model: the different types of subscriptions

Subscription for dematerialised products

The subscription model first became established in the software. As the product was already dematerialised, it was relatively straightforward to take the model a step further by switching to subscription. While we can regret the era of perpetual licenses, we cannot hide the fact that the subscriber derives a significant value (updates, new versions) that the previous model did not offer or only in a limited capacity. But in the end, I find that in most cases the deal is quite impressive. Take Adobe, for example. Some of its specialised software has become indispensable to entire sectors of activity: Photoshop for graphic designers, Lightroom for photographers, Premiere for videographers. This software was inaccessible (in terms of price) to the general public, which led the company to offer redacted versions of certain features (Photoshop Elements and Premiere Elements). Today, thanks to the subscription system, everyone can afford Photoshop or Premiere. The flexibility of the subscription also makes it possible to satisfy a specific need at the best price. If you only need particular software for a few months, the subscription model is unbeatable. For these reasons, and in the case of cloud computing services, the subscription system seems to me to be a business model that brings a lot of value to all stakeholders.

The Dash button allowed Amazon customers to order recurring products very easily. Credits : Shutterstock.

A subscription for recurring purchases

The subscription model has also been extended to recurring purchases: laundry detergents, coffee, and so forth… roughly 80% of everyday consumer products we buy each week or each month. The idea here was to create value for the consumer by sparing him the chore of repetitive purchases and automating delivery. Here again, it is difficult to deny that the automatic payment of these recurring purchases was attractive to the consumer. Amazon has rushed into the niche with its “Dash buttons”, which are then available in multiple variants. It has finally decided to stop its distribution this year (see this TechCrunch article for more information). The capitalist dream of an automated supply to the end consumer has also invaded Nespresso.  In an article that we devoted to its new line of connected machines, we anticipated the creation of automated delivery of the capsules. In September 2019 Nespresso launched a subscription offer where you pay 19€ or 29€ each month for your capsules and received in exchange a machine for 1€.

The Nespresso subscription scheme in the UK.

The Nike Adventure Club allows subscribers to receive a new pair of shoes every month or every 3 months.

A subscription for durable consumers goods

And now the subscription applies to durable goods (trainers of the Nike Adventure Club for instance). The subscription model transforms these permanent objects into perishable consumer goods. In a desire to sell more and more, to gain more market share from an increasingly unfaithful younger public, the consumer is therefore drowned in a wave of products whose abundance is no longer about need. In the phenomenon of consumerism, this overabundance was already legion, but it was decided by the consumer. In other words, it was the consumer who chose what he needed and in what quantities. In the subscription model, it is the brand that “pushes” the products to the consumer, whether they are required at the time or not. It seems to me that this is a significant change, and not necessarily a positive sign at a time when the planet’s resources are running out.

In Brief

In the end, we see a relatively obvious evolution of the very purpose of the subscription business model. From a business model at the service of the creator (allowing him to reduce the risks inherent in the production of his work in the long term), the model has gradually transformed itself to finally enslave the consumer (the example of the Nike Adventure Club). The turnaround in power is, therefore, radical. In the oldest subscription models, it is the supplier (writer, painter, start-up) who needs the consumer to guarantee his future and therefore offer him an attractive “deal” in exchange for the payment of a regular amount of money. In the subscription business model proposed by the Nike Adventure Club, it is the company that is in a strong position and literally “pushes” products to the consumer, whether or not the consumer needs them. Under the guise of fallacious arguments (introducing children to new activities), Nike’s long-term goals are in fact to 1) accustom the youngest children to its brand and 2) prevent parents from buying from competitors by providing them, even before the need arises, with excessive quantities of its products.

In the battle for market shares, everything goes, regardless of how bad for the planet, everything is allowed.

Posted in Strategy.

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