Slack and the Art of Subscription Management
Product swagger and MBA case studies
Ranjan here. This week I’m talking subscription flows.
I got my MBA from INSEAD in 2010. It's a French business school that also has a campus in Singapore. When I tell people this, they often smile with a look that makes it clear they think you went to a sham party school.
I didn't enjoy the coursework first few months. We'd discuss business case studies on old French furniture firms or Belgian factory workers on strike. Everything felt way too theoretical. Until the Netflix case.
First, a quick primer on business school case studies. They give you background on a company, and then usually present a strategic crossroads, a big corporate decision to be made. As a class, you all discuss together, sometimes even role-playing characters. It's a really fun way to learn.
The Netflix case was primarily about how the company's DVD-in-the-mail business was very strong, but "a new challenge was on the horizon: video-on-demand. How should Netflix respond?" It's pretty cool that in 2009 (when the case was written), a couple of Harvard Business School professors understood the significance of what would end up one of the most important business decisions of the decade. Netflix clearly got things right.
Now, I say what's next with a hint of vulnerability, but if the stuff you thought a decade ago doesn't make you feel stupid, then you ain't learning. And you're all Margins readers, so you're like family.
Right before I left the U.S. to move abroad, one of the items on my to-do list was to cancel Netflix. I prepared myself for the misery of sitting on hold and being up-sold by some pushy customer service rep. Magically, with two clicks the cancellation was complete. I had never seen anything like it.
When we were discussing the case study a detail that jumped out was that, as part of Netflix's customer obsession, they made a very purposeful decision to allow for online-only cancellations.
I admit it. It blew my mind that this was a very conscious, courageous decision. That a "little" detail like this was the result of a combination of business people and technologists coming together to take a chance felt profound (I cringe, but really, it felt like that). I was a longtime gadget-obsessive, but I was utterly product-illiterate. Hey, I was coming from finance.
It was the first time I thought about what a good subscription process looks like.
Subscription Management Swagger
Fast forward to late 2014. We were starting to build out our personalized news app Informerly, and a friend introduced us to this hip new chat product called Slack.
Having worked at the Financial Times, I had become reasonably well-versed with the ins and outs of subscription management and on one of our first Slack bills I was absolutely shocked to see something:
This was the most gangster subscription management move I could imagine. Here was a relatively new startup that was so confident in its ability to deliver value, they gave you money back for users who didn't use it. The subscription economy often is run on the hope that you forget you're paying, or by locking you in with onerous, opaque contracts, yet Slack was so confident, they, I repeat, gave you money back for users who didn't use it.
55 bills later, I basically live on the platform. If you're looking to build customer loyalty and show supreme product swagger, take a look again at that email above. This is what an incredible subscription user experience (SX? SUX? Let's go with SX) looks like, and SX is going to become an increasingly important part of so many different types of digital businesses. It’s time to start thinking about how we collectively get it right.
Fun fact: I just learned Slack is an acronym for Searchable Log of All Conversation and Knowledge (and it’s original name was Linefeed).
Subscriptions Eating the World
eMarketer has some good stats on the rise of subscription-based businesses:
On average, US consumers subscribe to three subscription services, up from 2.4 services five years prior.
34% of US respondents said they would use more subscription services within two years
It's gonna be video (Netflix, Amazon Video, Hulu, Qiubi), audio (Spotify, Apple Music, Luminary), fashion (Amazon Wardrobe, Trunk Club, Stitch Fix), food (meal delivery), and regular-life SaaS (iCloud storage). It might even be health care (personalized vitamins, PillPack), and I'm sure I'm missing other things. I still shudder at Scott Galloway's predictions about Amazon and predictive commerce. Our lives will be increasingly subscription-ified.
So can we all demand that there are some basic industry standards around subscription processes?
I get this stuff is hard. At the FT, I saw how the media subscription sausage was made at relative scale. At Informerly, we tried launching a subscription business and just getting basic infrastructure in place sucked in 2015. Our actual product was never going to cut it, but setting up user communication flows, allowing for subscription management, and the dreaded dealing with expired credit cards were all miserable.
Even when people wanted to pay us, it wasn’t always easy. It’s incredibly heartening that platforms like the one I’m writing on are working to make this a bit easier.
Fun fact: The email flow you set up to remind people to update an expired credit card is a Dunning Email, which "comes from the 17th century verb dun, meaning to demand payment of a debt."
Negative Option Billing
But there's still a long way to go. The Wall Street Journal, still, requires you to call in as a digital subscriber. On a phone. In 2019.
If the economy will be subscription-ified, the mentality needs to move more towards Netflix/Slack and less negative option billing (or duplicity-as-a-service). Remember those 8 CDs for a penny deals? The AV Club interviewed former Columbia House employees (including Sasha-Frere Jones) on how it portended the internet subscription economy:
CW: The whole business was premised on this concept called negative option. Which just sounds so creepy and draconian and weird, but the idea that if you don’t say no, we’re going to send you shit. It’s going to fill your mailbox, and we’re going to keep sending it unless you panic and beat us back. That was how the money was getting generated.
SFJ: Most times when you’re trying to get somebody to buy something, you are actively trying to get them to go and buy the thing, even if now it’s clicking or subscribing and subscription. Columbia House had this brilliant, perverse method which was [that] you sign up and then all you have to do is tell us not to send you things, and if you don’t remember that, we are going to sell you something and you have to pay for. And enough people will like that? Okay. And it was a profitable business. Could you ever get anyone to do that again?
PO: You can get a free trial of software, and if you don’t deal with turning it off, you’re going to get billed for $49. Again, all these things are precursors to how business is being done on the internet.
Save us, Apple.
Apple should’ve been the one moving us in the right direction, but the fact it takes until iOS 13 to give you a heads-up if you're deleting an app that you have a paid subscription for means we still have a long way to go (shouldn’t that automatically cancel your subscription?). No one is taking the lead.
The system is still built around passive behaviors rather than active ones. Everyone hopes you forget rather than remember. A few items on my Subscription Experience wishlist:
Getting a notification that a bill is coming soon as opposed to after it's been paid.
A very clear App Store/Google Play dashboard that tells you exactly what you'll be spending a month.
One-click cancellations, where the service retains your data to allow for a one-click re-subscription (unless you specify you want your data permanently deleted).
Free trials without credit cards up front, or where you have to specifically opt-in to trigger the initial subscription payment.
I understand the list above is about as likely to become a reality as Vox Media moving to Vimeo. I know all those request would increase churn, and no one player would be able to compete if they’re the only ones (unless you’re Slack). But the point is, to make this whole subscription thing work at cultural scale, we need to collectively make consumers feel positive and safe about subscriptions, not stressed. Make it more Slack-ish and less gym membership-ish.
Epilogues and MBAs
That MBA program ended up being an incredible experience. INSEAD has a very global student body, and I'll never forget, right after that Netflix case discussion, a Pakistani classmate asked me why anyone would bother with DVDs by mail, and not just buy them "from someone on the street, cheaper". He's currently an executive at Careem, which just sold to Uber for $3 billion, so I guess he figured out how to adapt Western models into emerging markets.
And my co-host Can is currently finishing up his MBA.….at INSEAD. Any readers interested in applying let us know. It's a great program.
What I'm Reading:
Reuters Institute Digital News Report 2019 - Key Findings: This report covers the idea of subscription fatigue relevant to news:
Even in countries with higher levels of payment, the vast majority only have ONE online subscription – suggesting that ‘winner takes all dynamics’ are likely to be important. One encouraging development though is that most payments are now ‘ongoing’, rather than one-offs.
In some countries, subscription fatigue may also be setting in, with the majority preferring to spend their limited budget on entertainment (Netflix/Spotify) rather than news. With many seeing news as a ‘chore’, publishers may struggle to substantially increase the market for high-priced ‘single title’ subscriptions. As more publishers launch pay models, over two-thirds (70%) of our sample in Norway and half (50%) in the United States now come across one or more barriers each week when trying to read online news.
How Columbia House sold 12 CDs for as little as a penny: The AV Club piece linked above is more on the cultural history of these "clubs". This Business Insider piece is a good quick look at how they made money. One incredible detail:
Larry: They would license the actual master tapes and the production files for the physical media from the major music companies. And they would be able to manufacture these records at a cost of about $1.50 or so each. In many cases, inferior pressings on vinyl and CD and you wouldn't get maybe the full lyrics and you wouldn't get the nice inserts and stuff and even the little booklets that were included in the CD were not quite as nice as the ones that you would get in the store very often.
Matt: By pressing their own albums, the clubs were able to make about $5 to $6 on each unit they actually sold. Even accounting for all the free albums they sent out.
If you made it this far, please enjoy this Columbia House CD club commercial. It doesn’t get more ‘90s: