The Subscription Paradox: Grow Faster by Acquiring Fewer Subscribers
In an industry ripe with catch phrases, few lines generated more grimaces than “the pivot to paid.”
But lo and behold, the pivot appears to be working. Publishers like The New York Times, The Washington Post, and The Wall Street Journal are all coming off victory laps celebrating subscriber milestones; memberships seem to be the new coin of the realm. Given the pandemic’s negative impact on already receding ad revenue, this couldn’t come at a better time.
Indeed, one might say we’re in a golden age of subscriptions. From the dowagers to the streamers to the long substacky tail (as nicely outlined in this recent post by Jarrod Dicker on Renaissance Creators), subscriptions are the rage.
But.
As positive as subscriptions may be for your business (“Recurring revenues — yes!”), they’re a negative for consumers (“Recurring charges — no!”). As we all know, consumers are besotted with options for their attention. Every credit card statement is a reckoning. Your offer faces a Darwinian battle for share-of-wallet with the likes of Netflix, Spotify Disney+, and Fortnite, among many, many others — with new competitors seemingly piling on by the day.
If you’re lucky enough to sell annual instead of monthly subscriptions, you can insulate yourself from some of the volatility. But let’s face it, the consumer “is this really worth it?” bar is set higher by the day.
An inevitable correction awaits. And if enough subscribers decide your product isn’t worth it, the resulting churn may well overwhelm whatever new subscribers you were able to attract.
Which brings us to one of my favorite metaphors.
Brand, Meet Leaky Bucket
Imagine a spigot that puts out a gallon of water every minute. Five minutes will fill a 5-gallon bucket; 25 minutes will fill a 25-gallon bucket. Simple.
But if each bucket has a hole that causes it to lose 5% of its volume in a minute, you’ll never actually fill the larger bucket.
Substitute “subscribers” for “water” and and the impact on your business becomes evident. As your subscriber base grows you’d better either find a bigger spigot, or ways to plug those holes.
In the early 2000s, I spent nearly a decade working for a consumer Internet business that at its height approached 5 million subscribers. But the monthly churn was an astonishing 4%, meaning that we were losing close to 200,000 subscribers each and every month. It won’t surprise you to hear that we never hit that 5 million subscriber mark.
So what’s someone selling subscriptions to do?
Retention as the New Acquisition
The adage “it’s cheaper to keep a customer than to get a new one” is so time-worn as to be a cliché. But few organizations actually behave that way. Acquisition is prized, while Retention is presumed.
Keep ten thousand subscribers from canceling, and you’ll be praised. Acquire ten thousand new subscribers, and you’ll be promoted.
Such an effort can be very labor-intensive, though — and labor is probably your biggest cost. You have to systematically manage subscriber lists and update them daily; be able to quickly identify, organize, and promote quality content; and then be able pull together promoted posts, delivered to the right subscribers, in an economical way. It’s a problem that cries out for a technology solution, which is why we at SocialFlow built a product that does just that.
Fish Where the Fish Are
Social media feeds offer you a significant opportunity to systematically provide content to your subscribers, and to remind them what they’re paying for. You’ll have to pay a per-impression cost to target specific subscriber cohorts, but the unit economics are surprisingly affordable: if you want to reach 1,000 subscribers with 10 stories each, you’ll spend about $50 in advertising (10,000 impressions at a $5 CPM).
When you look at where consumers spend their attention, you don’t have to look far: they’re spending it on platforms such as Facebook, Twitter, Instagram, and TikTok — typically on their mobile devices.
Consumer attention may be the most valuable commodity in the world, and a company like Facebook is worth $600 billion because it’s consistently proven that it can capture that attention.
Leveling the Playing Field
Most publishers have already made a significant investment in distributing content to social networks. SocialFlow’s biggest customers publish on the order of 100,000 organic posts every month to platforms including Facebook, Twitter, Instagram, LinkedIn, and Pinterest. A social media presence has become table stakes for the modern publisher, and much has been written about the systemic problems with this arrangement.
If you’re one of those publishers with a large social footprint and a subscription business, shouldn’t you think about how you can leverage that attention you garner for further gain?
By reminding your paying customers why they subscribed in the first place, you can reinforce their content consumption habits and increase the chances of a long-term relationship. The key is to do it systematically, every day — and to leverage technology to make sure you keep up with the daily flow of subscribers, while keeping your labor costs in line.
Social networks are not your friends, but they’re not your enemies either. By more effectively reusing the content you already publish, you can plug the leaks in your bucket, keep your subscriber base growing, and extract more value from what you’re already doing on social networks.
Growing faster, by focusing less on acquisition.
