Are your payment solutions optimised for millennial customers?

It surprises me how few businesses that generate revenue from recurring payments are offering e-wallet payment solutions. We all know that millennials’ shopping journey involves multiple devices so it’s key to optimise your website, and payment process, for web, mobile and tablet.  

Millennials' use of mobile means eWallets payment solutions should definitely be included.  Offering payment options such as Paypal or Apple Pay for small recurring purchases or paid trials are important to include alongside established payment options such as credit cards and bank transfers like direct debit.

When it comes to subscriptions, one publisher I spoke told me that 30% of paid triallists used PayPal.

In North America, Apple Pay is already the most popular alternative payment method in terms of retail acceptance. According to research from Boston Retail Partners, the service was accepted by 36 percent of North American retailers by December 2016, with another 22 percent saying they plan to accept it within the next 12 months.

If you are working on your product development roadmap you'd be wise to consider  e-Wallet payments with Apple Pay or Paypal being the most popular.

Here’s an infographic showing % of retailers in North America that accept alternative payments such as Apple Pay. 

https://www.statista.com/chart/11576/retail-acceptance-of-digital-payment-services/

As more and more customers embrace subscriptions for services and products that are one-time purchases today, we’ll see most spending take place with regular vendors on a recurring basis.  In summary this means:

• Recurring pull payment methods will continue to gain market share

• Simpler consistent user experience will yield higher conversion rates than fragmented journeys

• Credit cards will remain popular and major eWallets will gain ground

• Bank Transfers will continue to rule in certain regions but global standards around authentication and guarantees are needed for it to gain more acceptance. 

Test then scale. Test then scale. This is the mantra that all innovators should subscribe to.

Moviepass hit the headlines again this week. In August they slashed the price of their monthly subscription from $50 to $9.95. The take up was massive. 2300% uplift in members, but that wasn't good news. Their website crashed and they were unable to fulfil customer demand.

The subscription price of $9.95 might be great for customers, but MoviePass has to pay its partner movie theatres the full-ticket price, which can cost more that $10. Multiply that by the fact that a subscriber is allowed to watch one movie a day and MoviePass starts losing money the moment any subscriber watches two or more movies a month.

Test then scale. Test then scale. This is the mantra that all innovators should subscribe to.

Rolling the offer out in just one or two locations or conducting customer research would have enabled them to understand: 

• what kind of customer behaviour the price slash would drive so they could price accordingly

• how many customers would respond and to staff up according to meet customer demand

• how to position the offer with their partners and to negotiate better deals ie on revenue share or a commission

Now they have negative sentiment to deal with in the industry and hundreds of thousands of dissatisfied customers.

AMC, the world's largest theatre operator have stated it would work with attorneys to see about blocking MoviePass use at its theatres.

https://www.forbes.com/sites/tendayiviki/2017/10/15/lessons-from-the-business-model-struggles-of-moviepass/#1db9776b7105

Why the 'nudge' theory can help drive subscriptions.

Richard Thaler won the Nobel prize for economics this week. He told the Economist that 'much of what nudging is about is simply removing barriers'.
Dollar Shave Club is a good example of how a subscription business is applying behavioural economics. The customer insight was that most men use their razors for longer than is comfortable, so 'when the box turns up, it reminds them to change their razor, which feels really good.'
Listen to the whole podcast from The Economist here.
And for more behavioural economics subscription 'nudging' examples, see here.  

It goes without saying is that the most effective nudges are the ones that enhance the customer experience.  As Richard Thaler says' 'nudge for good'.

Tips for managing subscription price increases

This week Netflix debuted a new pricing scheme, which will see the cost of its mid-tier plan go up by $1 from $9.99 to $10.99 a month. Its top-tier “premium” plan will now cost $13.99 a month, a $2 increase over its previous price tag of $11.99. The bottom-tier “basic” plan is unchanged at $7.99 a month. 

Last week I was at the Zuora Subscribed London event listening to the experts from Simon and Kucher talk about pricing strategies. Here are some of their tips for managing an effective price increase:

• Don't do a flat price increase across the board, A uniform price increase is almost never the optimal strategy - rather, do targeted price increases.
• Don't make the price rise the headline - time it with good news and focus on the category growth story. In July, Netflix announced it had earmarked $6bn to spend on content this year. 
• Have a clear rationale for the increase.  Increased costs, such as rising oil prices is not a valid reason. If you use cost increases to argue for a price increase, are you prepared to bring the price down when commodity prices go back down?
• Be prepared for deal-chasers and brief customer-facing teams on how to counter objections. 
• Prepare for a short-term volume dip. If you can stomach the dips you will enjoy a much greater chance of getting the price increase to stick.

Incidentally, after the price changes were revealed, Netflix shares rose 4.25 per cent to $192.29, putting them on track for their best one-day gain since July.

https://www.ft.com/content/10ec51db-104d-37c6-8161-cc704d9a18f6

Do your customers trust you?

The latest ICO survey results show that 80% of customers don't trust private companies with their personal details. Think about GDPR as the way to supercharge your data and build truly great customer experiences.

https://www.edq.com/uk/blog/8-reasons-why-the-gdpr-can-help-boost-your-business/

Subscription spend triples - with home security showing the greatest potential.

Subscription spend in the UK tripled in the UK according to the YouGov 'A Nation Subscribed' 2017 report.  The UK adult population spends three times more per month on subscription services than the previous year. The average UK monthly spend is now £56 compared to £18.49 in 2016. 

Zuora, a marketing-leading enterprise software company that designs and sells SaaS applications for companies with a subscription business model, have developed a Subscription Economy Index which found that companies adopting subscription models are growing at a far faster rate. 

Subscription businesses grew revenues about 9 times faster than S&P 500 company revenues from January 2012 to March 2017. And over the past six months, European subscription companies grew even faster at a rate of 22% YoY.



This trend is set to continue along its growth trajectory as an estimated 25 percent of UK adults predict that they will be subscribing to more services over the next five years. 

The report also found that subscription-based businesses in the UK must overcome a series of negative consumer perceptions about subscriptions if they are to continue to grow their market share and disrupt incumbents. The research study shows that the key barriers to adoption are: difficulties of trying to unsubscribe (53%), price/feature changes during the contract period (51%), fear of the value exchange, (43%) complexity of subscription contracts (38%)and poor customer service (37%).

John Philips VP, EMEA, Zuora said “The only way businesses can sustainably maintain relationships with consumers and grow is by moving away from their product-centric mentality and creating long-term brand affinity based around flexible subscription-based services.” 

https://www.zuora.com/resource/a-nation-subscribed-2017-state-of-the-uk-subscription-economy/