How the Subscription Economy Will Change the Price We Pay

Should a customer in New York pay a higher price than someone from Ohio for the same service? And should a doctor in Ohio pay a higher price than a New York taxi driver? Should a Mac user be steered to a pricier hotel when shopping online? Hint: It’s already happening.

A growing number of companies have already shifted to a subscription model, where customers pay a monthly fee. Now, more firms are experimenting with charging customers different prices and using alternate pricing plans, based on data and analytics that can maximize revenues and customer satisfaction.

American consumers increasingly use subscriptions for things once bought one transaction at a time, such as watching movies on Netflix or paying one annual fee to Amazon for all their shipping costs. Subscriptions are in vogue for everything from buying razors (Harry’s or Dollar Shaving Club) to buying underwear (MeUndies) to beauty products (Birchbox).

Charging different prices for subscriptions is the latest development. And to find the cutting edge of where that experimentation is taking place, look at how companies handle subscription cancelations.

Subscription companies often make big mistakes when customers try to cancel. They either try to hide from the cancellation (by making their number hard to find or difficult to get through to someone). Or they try to get the customer to reconsider their decision without changing the price or the service level.

Smart companies find that customers who want to cancel automatic monthly payments will often accept a different offer. For example, one customer might be offered three months free followed by a one-time payment for the balance of the year. Another customer might be offered one month free followed by a six-month subscription, with a one-time payment, followed by another free month. A third customer might be offered a different product bundle at the same price.
Different customers respond differently to various offers, based on everything from demographics to location to time of year. Orbitz experimented with this concept back in 2012, pitching higher quality hotels to Mac users after learning that they spend, on average, $20 to $30 more per night for a hotel room.

Maximizing revenues
As companies gather more customer data, they can maximize revenues by trying different subscription offers. A/B tests can prove which offer generates the best retention percentage for each customer demographic; real-time analytics can suggest different offers for different customer types, serving them up in real time. For instance, a call center employee would have a tailored offer when a customer calls, created by underlying software — ditto automated phone systems and web interactions. Based on our experience working with companies, such strategies can help a company retain as many as 15% of customers who would otherwise cancel.

Rather than hiding from customers trying to cancel their subscription…

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Retail in Canada is at a crossroad, with the promises and challenges of digital being the next step forward. Digital should be looked at as a tool to grow Canada’s retail ecosystem, particularly at the local level, but equally as a threat to the very survival of local retail if not properly harnessed. This white paper focuses on the local digital retail nexus that exists across Canada and explores how the “cities as warehouses” concept may provide some needed answers to the digital gaps in Canada’s retail sector. 

3 Key Takeaways from the Report
Ecommerce is re-shaping the entire retail sector, while customers’ digital shopping habits are evolving well beyond the capacities of most local retailers.

Canadian retailers as a whole are not prepared to take on the digital imperative required to survive and compete in today’s rapidly changing economy.

Collaboration is a powerful solution to the challenges posed by ecommerce marketplaces and changing shopping habits.

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