Opinion

Paywalls and prayers are not enough to change the minds of customers

Far too many companies believe that they can simply adopt a subscription-based model and wait for the dollars to roll in, but this approach is totally misguided, writes Michael D'Oliveiro

The recent arrival of Google’s new subscriptions feature for publishers is sparking lots of interest and renewed discussion on the topic of well, subscriptions.

After all, it’s the Holy Grail of business models in the world of e-commerce. Everyone, including investors, loves the idea of a business with recurring monthly revenue. Better still are the ones where annual licence payments are due upfront.

The trouble is that most entrepreneurs automatically think they should go for subscriptions as a business model, thinking that this is easy cash-flow for a business once they ‘turn on’ the feature. It isn’t.

Having spent many years in media and telco companies in South East Asia working within the subscription business model, there are many challenges. No one using it is sitting back watching the meter tick with incoming subscriptions whilst calculating their bonuses.

However, there are six fundamental rules that I believe will give a media and streaming businesses a fighting chance.

You need an outstanding value proposition

No surprises here. Millennials are getting more cynical after seeing their parents spend exorbitant amounts of money on printed publication subscriptions and heavy Pay-TV bundles over the years. With lock-in terms to boot. They see subscriptions for what it is, a great way to make money at their expense. So if you can’t articulate why you deserve to be paid – especially when there are free or cheaper alternatives – you are heading towards doom. And no, having a great user-expereince is not a value proposition. It helps. But get your content or your service serving a purpose first.

Provide a proper free trial

Start with, and promote, your monthly plan. As mentioned earlier, people are wary of being locked-in to terms. But always offer a good deal in your pricing plan. Everyone appreciates a good offer. If they enjoy what you have, encourage them to upgrade to an annual plan to achieve a slight discount. Make this the surprise option, not the default option when you sell.

It is also important to consider (given your market coverage) how flexible you want to make pricing for your customer segments. Consider daily or weekly plans, since in emerging markets, not everyone gets paid monthly like you. Some simply can’t afford a monthly price point.

Payment matters

Just because you have a credit card doesn’t mean that your customers will too. In South East Asia, card adoption rates are relatively low, especially in countries like Indonesia (try 1 per cent) or the Philippines (4 per cent). To run subscriptions as a model means having to judge the best non-card options out there.

An inevitable fallback is carrier billing. The telcos take a cut as a billing agent but now you’ve got greater coverage and a marketing partner to work with. And yes, carrier billing even works with mobile pre-paid customers provided there are minimum balance when deductions are to be made.

Great service is key

We’ve all been through it. The moment payment is required from a site we immediately start to process a range of decisions about the value of what we might be getting. Do I really need this? Should I wait for a promo deal? Is there a way to get it for free? Once they get it, they will be even more demanding that you live up to your bargain.

As such, you need to articulate added benefits prior to the ‘checkout’ page so there’s little room for doubt. Bombard them with fanatical yet personalised CRM so that they understand how to get the most of what they’ve paid. Otherwise, they will churn in a heart-beat and leave unflattering reviews in the App store.

The secret is in the data

Finally, if you’re not using a sales funnel view to track your visitors’ conversions to subscriptions then you better start doing so today. Once you set your goals, you need to be absolutely data-driven about how you convert your customers and this should be a weekly, if not daily, ritual.

Every registration or sign-up step is a data point that tells you something about how customers feel about the process. That’s where a good data science team will ultimately help you with success in building a dashboard view and the right reports. This is the final step in ensuring you are ready for a subscription-based business model.

You cannot just turn on a paywall and pray it will work. The devil is in the detail. Only then, can you hope to change a mindset.

Michael D’Oliveiro is the former country manager of HOOQ Singapore and the founder of start-up Xerrata. This article was republished with permission from LinkedIn. 

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