Companies with subscription business models have a wealth of consumer data at their disposal — but far too few take advantage of this customer info to grow.
Allow me to take a step back and elaborate.
A few years ago, I wrote about James McQuivey’s digital disruption research. I remember arguing the digital relationship formed between consumer and brand revolutionizes multiple dimensions of the company — not least of which is consumer insights.
I also argued a customer data platform (CDP) gives you the knowledge to discern what utility needs to be delivered, what value you’re providing, and knowledge over time.
A few years later, I still stand by that argument — but also think I understated it. In fact, I see a deeper, underlying phenomena.
Namely, I’ve realized the only sustainable way to grow a business is to build a mutually beneficial bridge between your business and your customers. That bridge is built with data.
This data isn’t black-boxed by a vendor partner. It isn’t imperfectly counted (i.e., people as cookies or pageviews). Nor is it superficially collected (“There’s a 38% chance this visitor is a woman living in Boston”) or questionably valid (over-valued impressions metric).
Nope. This customer data is completely unique and impossible to commoditize.
It’s name? First-party data.
Subscription businesses prove first-party data helps build customer relationships
Using first-party data to build a bridge to customers predates trendy subscription business models. To name a few popular examples:
- Neither Netflix or Amazon use purchase data for content or product recommendations. Instead, they use their audience and shopper data — both of which are considered best-in-class.
- UnderArmour bought MyFitnessPal for a whopping $475 million after buying MapMyFitness for $150 million, giving the analog fitness brand an incredibly rich understanding of consumers’ (and potential shoppers’, of course) fitness regimens and lifestyles.
- Hearst diversifies its subscription business model based on data. The publishing entity has data on 90 million users across all of its markets. For those users, the company tracks behavioral patterns and content consumption categories to better understand them. As Rob Barrett, president of digital media at Hearst Newspapers put it, “With profiling, we can mine larger audiences for those that can convert and create channels to drive subscriptions.”
- Disney spent more than $1 billion on the infrastructure and experience associated with its MagicBands. As explained in Wired, “For Disney, the MagicBands, the thousands of sensors they talk with, and the 100 systems linked together to create MyMagicPlus turn the park into a giant computer — streaming real-time data about where guests are, what they’re doing, and what they want. It’s designed to anticipate your desires.”
In all of these cases, one thing is true: understanding the actual, authentic individual who engages with the brand is fundamental to a successful business relationship with them.
With first-party data, brands can understand questions that lead to sustainable growth:
- What kind of products would this person want to buy more of and more often?
- Can I suggest curated content I know will resonate with this person’s style and interests?
- What content will they want to come back for more of and result in higher engagement?
- Where are opportunities to reduce friction in their customer journey?
- When is the right moment to engage and in what channel should I do so?
Brands with subscription business models continue to capitalize on first-party data
The rise of subscription services fundamentally changes how customers interact with brands.
There isn’t more competition in the retail space because there are new products. Rather, companies with subscription business models are simply selling differently.
And it’s working.
Today, about 50% of U.S. online shoppers say that they subscribe to a media subscription service (e.g., Netflix, Spotify) and/or a product delivery service (e.g. BirchBox, Dollar Shave Club), according to research from McKinsey.
Whether it’s an actual subscription business model or just the subscription mentality, this is the ultimate reflection of part of McQuivey’s disruptors thesis:
- “Instead of focusing on how to sell the product we create … [we] obsess about aligning the total experience of our product with the customer’s desires, giving them what they want, when and where they want it.”
Subscription services interact directly with consumers and, therefore, are in control of the entire customer experience.
As the authors of a recent Harvard Business Review article argue, it’s about relationships:
- “If the primary benefit is convenience/replenishment, subscriptions present an opportunity to create an ongoing relationship with the customer, redefining the conventions of traditional retailer/consumer engagement. Subscription is a form of partnership, a new dimension that moves beyond the transaction. Subscription is therefore not simply a replacement of the in-store experience but rather an expansion to the way a retailer or brand can engage.”
Time and again, it comes back to a value exchange based on first-party data.
Consumers want (and, honestly, expect) great experiences from all companies today. First-party data that’s unified and activated helps you do just that.
It’s why the hype around the CDP continues to grow — and won’t stop anytime soon.
Watch our on-demand webinar to learn how leading companies monetize their audience data and grow subscriptions with our customer data platform.