News media is not the only industry playing with subscription models, Robbie Kellman Baxter, author of The Membership Economy, told the audience on first day of the INMA Media Subscriptions Summit in London.
“Virtually every kind of industry is moving toward a subscription model,” Baxter said.
This goes beyond media companies like Netflix and Spotify, she said. A 3-D printer company requires users to rent its product and send data back to the manufacturer. Even unexpected industries, like dental pain management companies, are exploring membership and subscription models.
Why membership models? It all comes down to relationships, Baxter said.
“I would say that the main reason membership is becoming so important is that technology is extending the infrastructure that enables trusted relationships,” she said.
These relationships are a long-term investment. While subscriptions are currently a hot topic, the freemium model is not a new concept, Gzregorz Piechota explained to the Summit’s attendees, following Baxter’s presentation. Piechota, senior research fellow at the University of Oxford, has been studying business model innovation and digital disruption.
“I believe that the freemium model started many, many, many decades before the Internet,” Piechota said. On September 13, 1987, the daily New York Times contained more than 1,000 pages of content and advertisements. The newspaper only cost US$1.25.
“We’re giving away our newspapers almost for free just to get more reach for our advertisers,” Piechota said. This still happens with publishers’ current freemium models.
“They want to maximise penetration in the cheapest way possible, and the cheapest way possible is to give away access to a stripped down product, basically,” he said.
As publishers redefine their business models, they also reconsider their pricing models. Pricing and trust are closely connected, Baxter said. With dynamic pricing that changes on tiered levels, or is negotiable on a retention basis, audiences have less trust in a company.
“As your pricing gets more complex, your trust goes down,” Baxter said. Audiences do not want to feel like they have to be experts in your pricing. “Subscription is a pricing decision. It’s a tactic. It is not a strategy.”
Simplifying the path to subscriptions is just one aspect publishers must consider as they rethink their business model. Membership is a mindset, and it may be linked to a redefinition of how publishers understand their own value in the lives of their users.
Piechota recognises a shift in how news media companies talk about their product as they pivot toward audience revenue models: “Basically they sounded like people from a political movement, a church,” he said.
Changes in perception go beyond talking points publishers use to communicate value to potential subscribers. They can have real impact on the actual structure and strategy of a company.
In her presentation, Baxter noted an organisation can change dramatically when it stops viewing members as customers.
“When you’re focused on serving the most loyal people in the best way, you’re kind of flipping things on their head,” she said.
Focusing on the most engaged users, what both presenters referred to as “super users,” does not only change an organisation, but it can also have an impact on a product.
“Suddenly you may realise is that your product becomes very different from other products on the market,” Piechota said.
Serving member needs is one way publishers can drive changes to their business models, as well as in their audience relationships. Baxter referenced Maslow’s hierarchy of needs, pointing out that, as people have basic needs met, like housing and food, they have the capability to reach for more personally fulfilling needs, such as social, self-esteem, and self-actualisation.
“And organisations that can tap into these timeless needs are the organisations that are going to get the greatest loyalty from the people they serve,” Baxter said. Long-term success is anchored to this loyalty, she said. Publishers must continuously demonstrate sustainable value for its members.
The road to a long-term subscriptions strategy is a long and challenging one, Piechota said, but there is hope. Each year, more people pay for news than in the previous year.
It may be a steep learning curve, Piechota said, but it’s well worth the effort: “I would like to thank you very much for your courage that you decided to go this route.”