Subscriptions are hot (and not).
Companies and investors love subscription business models since they generate recurring revenue that translates to predictable cash flow. The more money a company is likely to make in perpetuity, the higher its share price.
From 2012 to 2019, the subscription economy grew more than 300%, and 75% of companies selling directly to consumers said they would offer subscription services by the following year.
However, with so many companies hopping on the subscription bandwagon, competition is fierce, and some big players are having trouble keeping their customers. According to Gartner, “only 20% [of subscription businesses] will succeed in increasing customer retention.”
What’s causing the subscriber boom and bust? What makes an otherwise promising subscription business bleed customers? And how can companies engender loyalty to hold on to their subscribers?
Before we answer that, we have to pinpoint what a subscription…
This article was written by Nir Eyal and originally published on hbr.org