Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals.
Paula: I’m your host, Paula Thomas, and if you work in loyalty marketing, join me every week to learn the latest ideas from loyalty specialists around the world.
Paula: Thank you.
Paula: So welcome to episode 44 of Let’s Talk Loyalty.
Paula: And today, I’m taking a slightly different approach in that I’m not talking about loyalty programs in the context that we normally use.
Paula: So we’re not talking about points-based programs or partnerships-based programs, or even engagement or gamification type programs.
Paula: What we’re talking about today is a completely different model of loyalty, which is really based around the business model of subscription.
Paula: Now, the reason I thought this might be an interesting topic to talk about was, I noticed my own behavior, particularly during this pandemic, is starting to drive loyalty towards different categories.
Paula: And as I noticed, I’m starting to, for example, subscribe for organic juices.
Paula: I noticed that lots of my friends were also taking subscriptions for other types of products.
Paula: And then I noticed actually a fantastic webinar from Ipsos in Denmark, which is exactly talking about the rise of the subscription model.
Paula: So I thought I’d bring on the two hosts of that show to talk about subscription for Let’s Talk Loyalty.
Paula: So with that introduction, first of all, I’d like to welcome Jens Dupont, who is an Associate Director at Ipsos Denmark, and Peter Jakobsen, who is a Senior Consultant at Subscrybe in Denmark to Let’s Talk Loyalty.
Paula: So I’ll first of all, just by asking Jens in fact, just to just give us a quick introduction to the work of Ipsos.
Paula: As you know, Jens, lots of our listeners around the world are loyalty directors, they’re loyalty managers.
Paula: So they’re probably familiar with the work of Ipsos as a research agency, but certainly be keen to understand the work you do in Denmark.
Paula: And then as well, why you started to do this webinar about subscription particularly.
Jens: Yes, thank you so much, Paula.
Jens: So I think as many of your listeners, as you mentioned, will probably know Ipsos is one of the biggest research agencies globally.
Jens: In Denmark, we have a relatively small office, but that also implies that we need to be more agile and flexible in the way that we work with our clients.
Jens: So we definitely benefits from the strong muscles that we have globally.
Jens: So we do a lot of work with the local clients, but with global perspectives.
Jens: And what we do is that we do all type of research around any marketing related challenges, opportunities that our clients have.
Jens: That also implies doing customer experience research.
Jens: So whether it’s in relation to developing or measuring a customer promise, the way that they execute their customer experience, whether it’s a mystery shopping program, that is something we users can help with.
Jens: Besides from the customer experience, we of course do a lot in relation to fundamental brand understanding and brand building and innovation.
Jens: So my background is within innovation and that is also why today you have brought me on the show to talk about the subscription model because, and I’ll come back to that later, probably, but that is something where we see a strong rise both from clients, but definitely also from consumers.
Paula: For sure.
Paula: Fantastic, Jens.
Paula: Thank you so much for that.
Paula: And as I said, the webinar was fantastic.
Paula: And when we come to the show notes at the end of this, I’ll make sure that we do promote the Ipsos webinar because it was really, really good content.
Paula: So Peter, tell us, your company name is Subscrybe.
Paula: So clearly this is something you’re very specialized in.
Paula: So tell us a bit about your own company and background working with subscription to drive loyalty.
Peter: Yes, thank you.
Peter: So Subscrybe, we’re still a relatively small company.
Peter: We are seven consultants in Scandinavia, working from Denmark and Norway.
Peter: And what we do is basically the traditional way of doing management consulting.
Peter: But instead of working with a specialized industry, we are specializing in, as you said, the subscription model.
Peter: So we work across all industries, more or less, and we have two major areas within subscription, which we call subscription innovation.
Peter: And that is our core area where we help companies that are not having a subscription model today.
Peter: How they innovate one, develop it, and execute it right.
Peter: And then of course, we also help existing subscription companies optimizing their model and also optimizing their organization and the processing, the value proposition and so on.
Peter: So we kind of like a 360 strategic and tactical management consultancy, so to speak.
Paula: Wonderful, great.
Paula: And I know you’ve got some fabulous frameworks, Peter, that you’re going to talk us through later.
Paula: But before we get into all of that, obviously the first question, as you know, on my show is always about our favorite statistics.
Paula: So Peter, I will start with you, as we’re already just, you know, chatting away here.
Paula: What is your favorite statistic?
Peter: Yeah, well, as some might guess, the CLV is definitely my favorite statistic.
Peter: CLV is, as some might know, customer lifetime value, the value you get from a customer in its total lifetime.
Peter: It’s the most important statistic for any subscription-based business.
Peter: But the interesting thing is that it’s also very hard to deal with.
Peter: So it’s kind of like a search for the holy grail that companies usually do.
Peter: And it’s not because the calculation is hard.
Peter: Yeah.
Peter: I like numbers and it’s fairly easy to do it.
Peter: Yeah.
Peter: What you basically do is you take your recurring revenue per user, minus your recurring costs per user, and then you divide it by your churn percentage in the period of time that you have your recurring cost and revenue.
Peter: But the hard thing is that it’s always changing and it’s always in motion because it’s based on your user behavior.
Peter: And I have a good colleague, I was discussing it with him a couple of days ago because we were making a prediction model for one of our clients.
Peter: And a churn prediction model is basically a model that tells you when you are going to bill a specific number of accounts within the next, let’s say 30 days, the model can point out who is going to churn.
Paula: That’s clever stuff.
Peter: It is and we haven’t really done it.
Peter: Not in the perfect way yet, but we’re working with it in many different industries.
Peter: But the hard part is that if you consider time as a parameter for churn prediction, the time that you are a customer have been with you.
Peter: So it’s basically the loyalty of the customer, then it becomes extremely hard to tell if the customer is actually going to churn.
Peter: And I think one of the, an example you can use is that when a person is born, let’s say that the initial lifetime estimate of that person is 70 years, because 70 years could be the average lifetime.
Peter: Then there are some very important milestones that will increase the estimate of the lifetime of that person.
Peter: So already when the person gets one year old, lifetime might be 80 years instead of just 70 years.
Peter: And that’s the same thing with subscription lifetime.
Paula: Okay.
Peter: So the calculation makes no sense if you only look at time, you have to put in consideration of a lot more behavioral statistics to work with it.
Peter: And that’s why I think it’s very interesting.
Paula: It’s certainly very interesting, Peter, and I can imagine your clients are very glad that you have the expertise to come in and figure out all the numbers for them.
Paula: So Jens, tell me what, from your perspective, what would be your favorite statistic, either from a loyalty or just in general, from your marketing?
Jens: Yeah.
Jens: So as we use as a numbers company, I have a ton of statistics, so it was actually quite a difficult task to pick one as being the most interesting one.
Jens: But I think what I came up with is based, and I think related to what Peter is talking about as well.
Jens: So we recently published and did a paper on what we call The Forces of Customer Experience.
Jens: So the Science of Strong Relationships, that’s the head title of that paper publication.
Jens: And essentially what we document in that paper is, and it’s based on more than 9,000 customer experience evaluations.
Jens: So it’s a global R&D from Ipsos.
Jens: What we investigated was to understand, how can we better understand how customers or clients can improve their return on a customer experience investments?
Jens: So Roxy, and what we actually found was that putting a higher weight and more importance on the emotional attachment will actually eventually enable customers to have, they’ll be far more likely to express a preference towards a specific brand.
Jens: They’ll be much more likely to recommend the brand than if we’re just functionally satisfied.
Jens: And then significantly more likely to stay with the brand in the future.
Jens: So I think the whole fear and talking about loyalty in general that historically wise, there has been a tendency to very much focus on being functionally satisfied, rather than actually creating a specific and special bond with between the user and the brand and the business.
Jens: And now with this paper, we statistically document that it’s definitely worth the investment to actually do that, create this emotional attachment.
Jens: So I think this was one of the breakthrough statistics from my side at least.
Jens: And I know this is something that also has caused a lot of discussion and interesting dialogues with our clients.
Paula: Wonderful.
Paula: Well, you’ll have to make sure that we have access to that paper if at all possible, Jens, because I’d love to share that with listeners as well.
Paula: Yeah.
Paula: And tell me, was that paper, was it pre-COVID or during COVID, was it prompted by COVID in any way or was it an existing consumer trend?
Jens: Yeah, exactly.
Jens: So this was something that was published, I believe February, so before the COVID really emerged and it was based on a 12 month data source.
Jens: So tracking back 12 months a year and with these 9,000 customer experience elevations.
Jens: So the COVID will not be sort of part of that overall model, but it would be interesting to do another run in a year to see the change in that.
Jens: But I would say generally the COVID is an even stronger argument for actually building this emotional bond to your customers.
Jens: And that is also why I brought this statistic today because I think the subscription business model is a brilliant way to actually ensure and build this emotional attachment.
Paula: Yeah, yeah.
Paula: And it really is, I think, the ultimate type of loyalty, really.
Paula: If somebody has committed, I think, to use your term, Peter, the lifetime value.
Paula: So I’m signing up indefinitely to purchase from you.
Paula: I think that really is the holy grail.
Paula: But I think from watching the webinar, what I liked, Peter, that you were even talking about, I suppose, was how many new sectors were getting into subscription.
Paula: So I had already looked at and we all know the usual suspects like Netflix and Spotify and Amazon Prime.
Paula: But I think you were talking about things like subscription for cars.
Paula: So for mobility, which I thought was a really interesting and totally different business model.
Paula: So I’d love you to talk about some of the new industries that you’re seeing and creating loyal customers using this type of business model.
Peter: Yeah, so I think that example was actually a Danish company called Drive.
Peter: It’s a combination of drive and a tribe.
Peter: Oh, actually, yeah, actually a tribe because they want us to become drivers.
Peter: Yeah, yeah.
Peter: And I think the reason that they actually made up that name was because they wanted to make a community around subscribing to your car.
Peter: So the way it works is that you pay a flat fee, a fixed fee every month, around 500 kroner in Denmark.
Peter: That’s about, I think, $70 in the US at the moment.
Peter: And that actually only gives you the access to the garage.
Peter: So that is a model that we would call and subscribe a green fee, because you pay for access.
Peter: And then you can choose a car and you can have that car for 30 days and you can swap it with a new car or you can keep it.
Peter: So there’s no long retainer agreements and so on.
Peter: It’s just every month you can choose a new car.
Peter: And what I really like about Drive is that from the beginning, they invented a loyalty program that gives you benefits depending on your drive level.
Peter: So that you can gain access to special rides in weekends.
Peter: If you want to ride a Porsche in the weekend, then you want to ride a Fiat Punto in the week.
Peter: And that works.
Peter: And so yeah, and I think they have executed it very well.
Peter: And they even have, I’m not sure how useful it is, but it’s a quite fun feature.
Peter: It means that if you and I are both drivers and we meet in the street, then we can bump our phones and we can actually swap our cars immediately.
Paula: Wow.
Paula: That’s super cool.
Paula: I love it.
Paula: Yeah.
Peter: Wow.
Paula: Sometimes we just need the fun factor, you know, I said we weren’t going to talk about gamification, but there it is right there.
Peter: It is.
Paula: Wow.
Paula: How would you know that the other person was a drive?
Paula: Do you know how that piece works?
Peter: No, actually, I’m not sure if you have like a tracker or something that shows you drivers.
Peter: But I think that could of course be developed and added.
Peter: But I think at the moment you need to know who the drivers are.
Paula: Yeah.
Paula: Yeah.
Paula: But I love the concept of tribe because, you know, when we talk about loyalty and Jens, you made this point already.
Paula: It can sometimes start off feeling very transactional.
Paula: And everyone’s talking about emotional loyalty.
Paula: So I think the tribe to me is the ultimate achievement of, you know, we really belong together.
Paula: Like it’s even beyond community and connection.
Paula: I do believe that if somebody feels like part of a tribe, there’s an awful lot of emotional investment, I think, that goes into that.
Paula: So that’s a really good model.
Paula: It’s fabulous.
Paula: It’s obviously taking off in Denmark.
Paula: Have you seen it around the world as well, Peter?
Paula: Do you know?
Peter: No, I think that an interesting thing about this model is that Drive is not producing cars.
Peter: They’re not a manufacturer.
Paula: Sure.
Peter: But I think that a lot of the manufacturers will go into subscription.
Peter: Mercedes is doing it.
Peter: Tesla has kind of been doing it from the beginning because of the software updates that they started from.
Peter: But I think over the next couple of years, we will see the car manufacturers trying to get closer to their consumer and are going to do a lot more direct to consumer sales, also subscription based.
Paula: Yeah.
Paula: And I’m a big fan of the shared economy model, which is, to me, I suppose, halfway between owning a car and subscribing.
Paula: In that, when I moved countries three years ago, I just hadn’t really got the need or facilities, actually, to buy a car and park it where I was living.
Paula: So I ended up just using literally Uber to go wherever I needed.
Paula: And I have stayed with that model ever since.
Paula: I actually find it amazing that I never have to care about a car.
Paula: It’s brilliant.
Peter: Yeah, I would love if Uber was still in Denmark, but unfortunately, they got kicked out.
Peter: Yeah.
Peter: But I think there’s actually a good point about the platforms that allow you to share.
Peter: In Denmark, we have DriveNow and Green Mobility, that are both electric cars.
Peter: But I think that one of the problems is that they don’t have subscription models yet.
Peter: So it’s more like a pay-as-you-go way.
Peter: And I think that if any of those companies developed and implemented a subscription model, then it would be a game changer.
Peter: Because obviously one of the problems is that their cars are standing still for way too long.
Jens: Just to compliment on that, because I think that’s a general thing when talking about subscription and something we definitely feel from the client dialogues that we have, that it’s not always, you know, and either or, you don’t necessarily only need to go full in on subscription.
Jens: It might actually be something that is a strong complementary factor to your business model today and something that can be extended over time.
Jens: Because I fully agree with you, Peter, in relation to the Shia Nao or Drive Now.
Jens: The feature for some, it would be a strong value, you know, to have this subscription you pay and then you have unlimited, you can drive.
Jens: Whereas for others, for example, for me, I occasionally use it, but I would not necessarily want to sign up for a fixed fee or something like that.
Jens: But I would rather go to pay for the time that I actually use it.
Jens: So I fully agree on that.
Jens: But I think it’s a really important dialogue.
Jens: And I assume this is something you talk a lot with your clients about, Peter, as well.
Jens: Is subscription the only way and we need to go full in or can it be a mix?
Peter: Yeah.
Peter: And it’s definitely one of the hard things to consider and also something that we try to consult, especially the companies that are in industries without subscription models.
Peter: Meaning how big a strategic focus should this be?
Peter: How much of your business do you want to be subscription based in one, two, three, five years?
Peter: And that’s a very important consideration to do.
Paula: Yeah.
Paula: Because it doesn’t suit everything, Peter.
Paula: And I liked something I just want to pick up on that you said earlier, which was there’s no long retainer.
Paula: And in fact, I was researching myself this week.
Paula: I was writing about one of the very big US subscription firms called the Dollar Shave Club, which I’m sure lots of listeners will be familiar with.
Paula: And one of the really prominent things I noticed on their website was, you know, they said, look, there are no sneaky terms and conditions and we will never make it hard to leave.
Paula: And I loved that because actually, I think part of us are like, actually, I do kind of like this and I’m thinking about subscribing, but I’m afraid I’m going to forget and end up overspending.
Paula: So would you see that as being one of the critical success factors for a subscription program?
Peter: Yeah, definitely.
Peter: Yes, a beautiful exit, as you might call it, when you want to leave is very, very important.
Peter: As you can see, Netflix right now is, I’m not sure if they’re just trying to make a market campaign or what it is, or if they actually are, very, very nice.
Peter: But Netflix has pointed out that they will actually cancel the Sompi accounts that they have in their customer base.
Peter: And Sompi accounts are, in Netflix terms, subscribers that have not been using Netflix for more than a year.
Paula: Okay.
Peter: So if you haven’t been using your Netflix account for more than a year and you’re still paying, then they would close it to make sure that you don’t pay anymore.
Peter: Yeah.
Peter: And I think it’s less than a half percent of Netflix’s entire base.
Peter: But it’s still a nice thing.
Peter: And it’s also a very, very, very good marketing.
Peter: I wouldn’t call it a stunt, but it’s a good marketing campaign, at least.
Paula: It shows a lot of integrity, actually, because to actually stop taking your customers’ money is an important…
Paula: I mean, I can imagine the CFO scratching his head going, are we sure we want to do this?
Paula: Because I’m sure there’s a big number on a P&L that he’s going to be giving up.
Paula: But I’d love to ask, though, just in general, Peter, because I have all sorts of categories, as you can imagine, listening to the show, what particular sectors do you think should be thinking about subscription, either now as a result of COVID-19, and I think I mentioned that I’ve subscribed, for example, to organic juices that I would never have thought of before.
Paula: But do you see that the current situation is driving particular opportunities in new sectors?
Peter: Yes, definitely.
Peter: And I’m not sure I would call it in a new sector, but I think one of the sectors that have at least opened their eyes for subscription is retail.
Peter: So groceries, even my mom now, she’s 71, she started buying groceries online because of COVID-19.
Peter: And she’s going to keep doing it because I was talking to her about, that was also one of the topics we had, Jens, when we did the webinar.
Peter: Are you going to retain these customers that have been buying from you when the crisis is over and things turn back to normal?
Peter: And a lot of them will be having a new behavior because the lockdown was so long.
Peter: So just the one person example, my mom is going to keep buying groceries online.
Peter: But right now she’s just loyal to the store.
Peter: So if they want to keep her, they either have to make a very, very, very bulletproof customer journey and customer experience every time, or they will have to build a barrier in some other way.
Peter: And that could be through a subscription model.
Peter: If you look at Amazon Prime, Amazon had a great increase in their stocks over during the lockdown.
Peter: And that’s, of course, because they have so many subscription based products.
Peter: So they pretty much have a security for these kinds of situations.
Paula: Brilliant.
Paula: And I think you’re absolutely right that, you know, that there’s so much has moved online.
Paula: And I think that that’s certainly something that we’re all hoping that it does continue.
Paula: What actually I hadn’t even noticed before, even as much as I love Amazon Prime, I do see that they have an extra program as well built around consumer packaged goods.
Paula: So again, in the kind of grocery space, which I think in the past, most of us did not go to Amazon to buy our groceries, but they also have a subscription model that I’m keen to explore.
Paula: I don’t know if it applies in the UAE, but you can either have a flexible, consistent delivery of groceries from Amazon or customize it month on month.
Paula: And I thought it was amazing that they again have a separate subscription model, but as you said, specifically in that vertical.
Peter: Yeah.
Peter: And actually there’s a retailer called Netto in Denmark who has just launched their version called Philip.
Peter: And it’s a tailor made subscription where you can, they actually have a pretty nice sign up flow.
Peter: So when you sign up to the subscription, you are being taken through a wizard that takes you through your home.
Peter: And then you in each room of your home, so you are at the bathroom, what do you need?
Peter: You are in the kitchen, what do you need?
Peter: You check the specific wares that you want, and then you decide in what frequency you want them delivered.
Peter: And this model is based on all the items and categories that don’t have short lifespan or shelf.
Paula: Very good.
Paula: And again, it probably really proves the model of Dollar Shave Club.
Paula: They actually had a hilarious launch video.
Paula: Again, I’ll make sure to link to it.
Paula: I’ve never seen it before, but it had had 26 million views when I looked at it the other day, and it launched the company.
Paula: But talking about $1 blades being shipped to your house, I have no idea how they made the business model work, but they sold, I know, to Unilever for a billion dollars in 2016.
Paula: So clearly something worked for them.
Paula: Jens, I wanted to actually ask you, if you don’t mind, just to take us through what you saw and what you talked about in that webinar as well about what are the principles that we need to be thinking about if there is an existing, I suppose, retailer in any category listening to the show and maybe saying, okay, I wonder what subscription work for my customer base.
Paula: What do you think they need to be thinking about in terms of success principles?
Jens: Yeah, of course.
Jens: So I think initially why we actually decided to host this event around the subscription-based model was because we could see that there were coming more and more questions from clients in different angles in relation to how can we better sustain a longer lifetime with our customers without having to interact on a very transactional basis every time.
Jens: And we also had discussions around more and more discussions on business model innovation, so what is out there.
Jens: And then we saw a clear tendency towards the COVID-19 tendencies, driving towards more some of these factors driving the relevance of the subscription model, so convenience, some of these things were clearly kickstarting subscription being relevant for new targets.
Jens: So that is why we, Ipsos Denmark, decided to host this webinar.
Jens: And in that event or the webinar, we took part of the part in a research we have done, Ipsos itself globally, where we investigated the relevance of the subscription model and how we can actually unlock consumer demand.
Jens: So what we investigated was that we looked at our experience with testing new innovation models and we found out that we saw three key drivers to actually change or impact behavior with consumers.
Jens: And this is super relevant when considering subscription models.
Jens: So what we found was that these three key factors or drivers, so one is it has to enhance my life, two, it has to do it for me, and three, it has to make me confident.
Jens: So of course, there are successful models that deliver and focus on one of these.
Jens: But what we could clearly see is that there is strong correlation and causality in relation to those business models that delivers on all these three.
Jens: They have a really strong chance for success in market.
Jens: And also we could see that this is actually often where subscription is delivering.
Jens: And that is also why we decided to engage with Peter from Subscrybe to have their point of view on the more strategical point of view in relation to how do you get the full organization on board with subscription.
Jens: And that was sort of the center of that webinar.
Jens: So of course, we have done a lot of testing within subscription as well in Ipsos.
Jens: We generally see two very present models.
Jens: So either it’s replenishment or it’s box subscriptions.
Jens: So you buy something and you get it for a box or you get, as Peter mentioned, for example, with filler, you get new groceries or not groceries, you get new stuff in as soon as you run out.
Jens: And we could see that these two are actually doing different things and also in relation to these three drivers.
Paula: OK, and between those two, I think replenishment seemed to be the most obvious one.
Paula: Was it Jens in terms of where people just had that rational kind of going, OK, well, I’m going to buy it anyway.
Paula: So I might as well subscribe to make sure it shows up on time.
Jens: Yeah, exactly.
Jens: I think the $1 Shape Club is a brilliant example of a replenishment service.
Jens: Whereas, for example, a box subscription could be a beauty box where you get a selection of beauty products.
Jens: In Denmark, we also have a super nice subscription that I actually use myself.
Jens: It’s called Aarstiderne.
Jens: So basically you get groceries and you get recipes for I get it for three days a week.
Jens: And then I know what to cook and I have all the ingredients and it’s always tasty and it’s organic.
Jens: So I think that is a brilliant example of a box subscription.
Jens: But where we could see the strong differences in those two models is that the replenishments generally indicate to deliver much stronger on convenience and also on the time-saving element.
Jens: Whereas, for example, with box subscription, it’s more a strong drive of innovation and then it’s being trendy.
Jens: So I think that those are the two main distinguishing between those two models.
Jens: And I think that is super important to have in mind when you actually develop your model.
Jens: Because if you’re only delivering on something that is a gimmicky, trendy and innovative, you might actually end up having a very short lifetime for your customer.
Jens: So I think it’s super important to have those considerations because otherwise it can be quite expensive to get the customers in if they’re leaving too fast again.
Paula: Yeah.
Paula: Yeah.
Paula: And I know there’s again plenty of models out there that, you know, looking at very high acquisition costs in lots of different businesses and whether that can be justified given the customer lifetime value.
Paula: And I would just add, obviously, Jens, I know it’s an obvious point, but as you said, there’s convenience that saves time.
Paula: But I think with COVID as well, that it also saves needing to actually expose yourself to risk.
Paula: So, you know, for me, as I said, the juices was something I kept saying, oh, I must go and, you know, get those juices organized.
Paula: And all of a sudden, when a subscription service presented itself and eliminated the need for me to go to the store to pick it up freshly, then obviously that ticked a lot of boxes for me, just to take one of those journeys out, you know, for my week.
Paula: Brilliant.
Paula: And I do agree that meal won, by the way.
Paula: So again, I referred to my friends all subscribing to lots of new things here as well.
Paula: And again, new types of loyalty.
Paula: And there is a very similar box idea where it’s new ingredients.
Paula: And my favorite example, I will say, and this might be an idea for somebody listening, it came actually from a beautiful restaurant, like one of the top, top restaurants in Dubai.
Paula: And I’ve only been there once.
Paula: It’s a very special experience.
Paula: But for that restaurant of that caliber to be sending groceries, videos and instructions of how to cook their meals, I thought that was a particularly premium subscription service, which I think is beyond just the I need to eat.
Paula: So give me some ingredients and a recipe and I’ll cook it, you know.
Paula: Brilliant.
Paula: And Peter, I wanted to ask you as well.
Paula: You touched on a couple of models.
Paula: I know we probably won’t have time to go into all of them.
Paula: And I think you’ve nine different variations.
Paula: And I think some of them are quite subtle.
Paula: But you mentioned Greenfee, for example, which is one type of model.
Paula: I’m not sure of the name.
Paula: I guess my favorite one, you might.
Paula: I’m sure you have a name for it.
Paula: But it’s where there’s unlimited product available for a fixed amount.
Paula: So do you have a particular name?
Paula: So I’m thinking, for example, there’s a couple of coffee shops in the US, including Burger King Bizarrely, which did an unlimited coffee for $5 a month.
Paula: So you can imagine now how appealing that would be to many people.
Paula: But what kind of model, how would you describe that one where the product is essentially unlimited, particularly when it’s a physical product rather than just like, I suppose, media, which most of us would be familiar with?
Peter: Yeah, because I think that’s really an interesting point that it’s going into physical products now.
Peter: And we call it something as original as All You Can Eat.
Peter: Because it is basically a buffet, right?
Peter: So yeah, the All You Can Eat model is, as you said, based on Netflix, Spotify, the media.
Peter: But if you can actually use it as a driver to get people into your store on your non-core products, so to speak, then it can be extremely strong.
Peter: If you can get it in your core product, then you can make people buy something around your core product.
Peter: It’s also brilliant.
Peter: So I’m really looking forward to see more of this coming to the markets, especially when it comes to cafes and coffee and so on, because we are not very loyal.
Peter: And many people have like one coffee bar they want to be at in the weekends and when they have a lot of time.
Peter: But when it’s not about time and it’s just about coffee before work or after work or something, then you normally get whatever is closest, right?
Peter: And if you can disrupt that decision making by making it an all-you-can-eat model.
Peter: So I actually walk, let’s say, another hundred meters or I think, okay, I should go in here, even though I was there yesterday, then it’s a brilliant way to create loyalty.
Paula: I love the Buff analogy, Peter, and my Irish listeners will definitely remember it actually happened in Telcos.
Paula: So when 3Mobile came into the Irish market, they had exactly a model, which was a package called All You Can Eat Data.
Paula: So it actually applies in Telcos as well, would you believe?
Peter: Yeah, I think there’s also something interesting about the model that Jens was describing.
Peter: And replenishment is also one of our models.
Peter: But I think that box subscription would usually be put into two categories in subscribe.
Peter: And that’s because it’s quite important that if you want to develop a box subscription, you have to consider what kind of experience you want to create.
Peter: And one of my favorite subscriptions is my beer mail from Mikkelow, a Danish brewer who is now internationally known.
Peter: That’s a surprise box.
Peter: So every month I get eight or nine beers.
Peter: And I have no idea what they are.
Peter: So that’s for the surprise element and for the personal care element, right?
Paula: Yeah.
Peter: But also on who’s delivering food, they can’t really make a surprise box because, well, they could.
Peter: But the churn from getting recipes that you don’t like would be immense.
Peter: I know that even now that you can pre-schedule what kind of categories you want and you can get recipes that are child friendly and so on.
Peter: If they put mackerel, is it called that?
Peter: The fish in English?
Paula: Yes.
Peter: I think they have about 25% churn each time they put mackerel into one of their boxes.
Paula: I would not enjoy that.
Paula: Yeah.
Paula: Too risky.
Peter: There you see.
Peter: So I think you really have to consider how much of a surprise element should be in your box and what problems is it actually solving or what is your value proposition for the box?
Paula: Yeah.
Paula: And it may also be how strong is your brand?
Paula: Like, you know, how well do your customers trust you?
Paula: Because another case study I know we talked about offline was actually Coca-Cola.
Paula: And I was super impressed that as a consumer brand with obviously the ultimate in trust, I guess, they’re now charging a subscription fee to a very small cohort.
Paula: I think it was limited to 1000 subscribers.
Paula: But again, like your beer proposition, you will get new flavors of Coca-Cola shipped out to your house every month.
Paula: So it’s almost like they’re flipping the model from sampling and you’re paying for the opportunity to taste something before anybody else.
Paula: So it’s almost becoming like an experience model, which is completely different.
Paula: But I think it’s very effective.
Paula: Beer and wine and works for all of those.
Peter: And as you say, it’s a great way to actually also get feedback on your new products from customers who actually pay.
Paula: Yeah.
Peter: And if people pay for a sample, they will also be more likely to be honest about the experience, right?
Paula: Yeah.
Peter: Because if you get something for free, it tends to be a little bit better.
Paula: And I also think I often talk about the whole point about word of mouth marketing.
Paula: So I think the whole concept of bragging rights really applies with something like that because I know they were totally oversubscribed.
Paula: And again, a brand like that is in a very privileged position.
Paula: But if I get a flavor of Coca-Cola that nobody’s ever heard of, I’ll probably tell everybody I meet.
Paula: You know what I mean?
Paula: Like my entire network will hear about that.
Paula: So yeah.
Paula: So there’s an element, I think, of the experience that subscriptions is obviously tapping into as well.
Paula: Wow.
Jens: Just to compliment because I think it’s super interesting what you mentioned here, Peter, in relation to adding a specific type of fish and then you actually have a high risk of having a lot of customers not being able or willing to buy the next time around.
Jens: So this is really where we encourage and also see that clients are willing to invest because I think this is what you can actually reduce that risk from testing upfront.
Jens: So you need to talk to your potential customers to understand how can we actually best possible deliver something that is of relevance to you, but also how do we actually incorporate or build a model.
Jens: So for example, in pricing structure that increases the chance of actually having the highest adoption possible.
Jens: And so at least that is what we see more and more that all clients are more and more willing to actually explore before they sort of go fixed on a specific model.
Jens: So I like the nuances that you have a subscriber with these nine different subscription models.
Jens: And I truly believe that one should never stick with one.
Jens: One should definitely go out and explore the opportunities with a few of these to ensure that they actually go the route that they sort of result in the highest return on investment.
Paula: It’s a perfect point, Jens, because actually I just you’re right that the whole point about testing is probably even more critical within this type of model because so many people are so worried that they’re signing up to the wrong thing long term.
Paula: And the one that also came to mind was a lunch subscription service I saw called MealPal.
Paula: But with that one, you could actually specify if you’re allergic to a particular ingredient.
Paula: So again, there’s absolutely no way you can launch something without having those kinds of things reassured so that the customer’s not worried.
Paula: They’re going to end up subscribing to something that they literally can’t eat or might have a literally a health issue with.
Paula: So I think testing is a very important point in this model.
Peter: Yeah.
Paula: Yeah.
Peter: And it’s actually an interesting point also because that as you were talking about, Jens, a lot of people are trying to increase their return on time, right?
Peter: So we feel like we are too busy to do basic things.
Peter: So that’s why we want replenishment subscriptions.
Peter: But at the same time, we want a very personalized experience, right?
Peter: Like if we had actually been consulting a person about what kind of food do we need to stay fit, to avoid my allergies and so on.
Peter: And that’s where it’s very, very hard to actually make a data structure.
Peter: That will allow you to personalize that way.
Peter: So what we see as a trend for the companies that understand this problem is that they just ask upfront.
Peter: And I see a lot of companies as a consultant that are afraid to ask their users and the subscribers because they think that their users expect a change in return.
Peter: But sometimes just being heard can actually increase commitment.
Peter: Because people don’t expect you to change from one day to another.
Peter: But then when the change comes, they will be very, very happy.
Peter: So I don’t think you should ever be afraid of asking or testing and including your customers in your product development.
Jens: But I think I completely agree on that.
Jens: And actually referring back to the paper I referred to in the very beginning, so The Forces of Customer Experience.
Jens: So here we identified six different elements that you need to deliver or you should focus on to establish this emotional attachment.
Jens: And one of those, so we have fair treatment.
Jens: So you need to ensure that your customers feel that there is a fair exchange in their relationship with you as a brand.
Jens: You also need to ensure that the customers feel that things are clear.
Jens: So certainty and that it’s transparent and working as expected.
Jens: And then control.
Jens: And I think that’s tapping into what you mentioned, Peter.
Jens: So you need to help the customers actually feel that they are in control of the situation and in the driving seat.
Jens: And I know that that might be crossing some boundaries for some marketeers, but I think it’s super important to lay down the guards and actually be a little more vulnerable towards your customers and listen to them, interact with them, realizing that they are human as you are yourself.
Paula: Yeah.
Paula: Yeah.
Peter: And it’s something about being bold and daring to actually ask stupid questions, right?
Peter: I think one of the examples that I really like is that a lot of us have subscriptions to fitness and workout centers, but we never really get there as often as we want to.
Paula: Yeah.
Peter: And so a way to do like light gamification of this is just asking what is your monthly target?
Peter: How many times do we want to get here?
Peter: Because the value that I get as a person from being part of this membership could be that if I work out four times a month, I would be happy.
Peter: But maybe Paula, you would like to work out eight times a month.
Peter: And even though we pay the same amount of money, we would both be happy if we reach our goal.
Peter: And we would both be similarly unhappy if we didn’t.
Peter: Even though the goal is relative to the person, right?
Peter: That’s why it actually makes sense to ask people in the beginning of a subscription, what’s your goal and why are you here?
Peter: Not because you need to use the data, but also because you need to start the progress with the subscriber and make them aware of their actual goals.
Paula: Yes.
Paula: Yeah, that’s a really good point, Peter.
Paula: I think actually, Jim’s, I hadn’t thought about, but yes, I mean, we all know, I think all over the world, I think it’s January, particularly that the subscriptions flood in and then basically die off as the year goes through because we’re not going and they’re not engaging by return.
Paula: So it just ends up kind of being a waste of money.
Paula: But I really like that model that I might only need to go once a week to make it feel like it’s value and good use of my money.
Paula: So I think that’s a really good point.
Paula: Fantastic.
Paula: Well, listen, guys, I think this has been a phenomenal conversation.
Paula: As I said at the beginning, for me, you know, the show is about driving loyalty in any shape or form, beyond loyalty programs even.
Paula: And what I love about the subscription model is, I think companies that are acquiring subscribers, I think they’re bought into the idea of a long term relationship with them rather than just the usual acquisition model.
Paula: So I think it’s really important that everybody listening does think about what their business can do from a subscription perspective.
Paula: Is there anything either of you wanted to mention before we wrap up?
Peter: Yeah, I think that your point here in the end is very important because I’ve been working for many years in sales, also in subscription companies.
Peter: Actually, I’ve never been working in a company that wasn’t subscription based.
Peter: But I’ve been doing a lot of sales strategy.
Peter: And obviously, what you do when you optimize sales is optimizing the reason to buy for the customer.
Peter: And in Subscrybe, we work, and it’s pretty simple, but we work in a two-way angle when we look at the value proposition, always looking at both reason to buy and reason to stay.
Peter: And it’s important to bring in those perspectives, and both of them, every time you make a market and loyalty campaigns.
Paula: Brilliant, brilliant.
Paula: Yeah, yeah, I will rub those words, Peter.
Paula: Reasons to buy and reasons to stay.
Paula: Fantastic, brilliant.
Paula: And Jens, anything from your side, from an Ipsos perspective?
Jens: Yeah, so I think a good roundoff is in relation to this whole thing.
Jens: So is this really relevant for me?
Jens: Probably a lot of your listeners would ask them that question to themselves and their organization.
Jens: I think when we sent out the invite for this event around the subscription model, I actually got a few emails back, super interesting, but this is not relevant for business.
Jens: And I actually took the chance to grab a few of these persons on the phone to really explain them.
Jens: So this is relevant for, I would say, more or less everyone.
Jens: It’s not always a profitable business, but it’s definitely something you need to consider and you need to stay mindful of.
Jens: So I think that that is just a key takeaway from talking about subscription, that this is not for a small group of companies, services, products.
Jens: This can be applied, I would say, in more or less everything, and Peter would probably be able to confirm that hypothesis.
Peter: Definitely.
Paula: Yeah, yeah.
Paula: And I totally agree, and yes, I think you made the point already earlier.
Paula: It’s not that we’re suggesting everybody replaces their entire business model with subscription, but it’s a new type of business model you can add in as appropriate, maybe to a particular product line.
Paula: So again, I think our role in this conversation is just creating awareness of all of the amazing new categories that are suddenly tapping into it, like groceries, for example, that might previously have been relevant.
Paula: So on that note, I want to literally wrap up and say thank you so much.
Paula: First of all, Jens Dupont from Ipsos Denmark and separately to Peter Jakobsen from Subscrybe in Denmark.
Paula: I think you’ve both been amazing, super interesting to talk to you.
Paula: So thank you so much from Let’s Talk Loyalty.
Paula: This show is sponsored by The Wise Marketeer, the world’s most popular source of loyalty marketing news, insights and research.
Paula: The Wise Marketeer also offers loyalty marketing training both online and in workshops around the world through its Loyalty Academy, which has already certified over 150 executives in 18 countries as certified loyalty marketing professionals.
Paula: For more information, check out www.thewisemarketeer.com and www.loyaltyacademy.org.
Paula: Thanks so much for listening to this episode of Let’s Talk Loyalty.
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