August 28, 2015

Naturebox, an example of a memership economy service. Credit: @iris / Flickr Creative Commons

Move over, sharing. There’s a new buzzword starting to attach itself to our economy: subscription.

For a few years now, tiered subscriptions have been in vogue. Once the niche selling point of startups like Birchbox and Dollar Shave Club, the membership model is now being embraced by top sellers from Adobe to Amazon to Starbucks, allowing customers to prove their loyalty by opting in to a long-term plan.

“Customers are saying, ‘I’m willing to sign up, set it, and forget it in exchange for a value accrued to me on a regular basis,” says Robbie Kellman Baxter, author of The Membership Economy.

The cultural significance of the subscription craze has been reported by Fortune and Forbes, each noticing that customers today demand more than simple one-time transactions. We want access to a vast library of ideas, information, art, and highly-specific products. We want companies that will make sure we get just what we need, when we need it.

“It is a massive transformation that is changing the way organizations engage with their constituents,” notes Baxter. “It’s about a move from ownership to access, from transactional to relational.”

Translation? This isn’t just a passing trend – it’s a broad, generational shift in the economy.

“Access is more important to young people than assets,” says John Warrillow, author of "The Automatic Customer". He believes this decade’s drop in home ownership – a 20-year low --  indicates a mass ambivalence towards the idea of possession.

Warrillow says we’re much more conceptually attracted to brands that advertise experiences, relationships, and belonging than those that simply sell a product.

“It’s a fundamental change in the way we think,” he insists.

Both Baxter and Warrillow agree that, while many people might have wanted this sort of convenience before, the subscription economy was only made possible by the explosion of apps like Uber and Airbnb. These companies, which hold onto your credit card information in exchange for being “there when you need it," helped create a virtual culture of trust (for better or for worse).

“It’s a little bit more like a marriage, where the consumer commits and the supplier says, ‘I’m going to look out for you, watch your back, and treat you right,’” says Warrillow.

Fingertip access to infinite, specialized options from one trusted source might sound like a utopian marketplace to next-gen consumers. But Baxter and Warrillow give us a few reasons to be cautious:

First, if big companies are only switching to the subscription model to keep up with the Joneses, are they really thinking through the best way to provide maximum value to their customers? (Adobe clients said ‘no way.’) Second, if we’re pushed into taking the lazy route to avoid repeated choices and transactions, do we really have as much agency as we think?

Finally, when even P&G is hopping aboard the recurring revenue train, what happens to the little guys?

Baxter and Warrillow have an answer, and it’s not pretty:

“The biggest liability is small, local businesses that cling to proximity. Those businesses are going to go away.”

Membership, Robbie Kellman Baxter, subscription, John Warrillow, Business, Kara Miller

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