The rise of micro-subscriptions

Welcome to 2022. That’ll be $2.99 a month.

If it feels like you’re suddenly being charged for everything in your life, it’s because you are. And more often than not, that line item on your credit card statement is a monthly charge.

Subscriptions are everywhere. Dinners, razors, video games, electric scooters, workout apparel: Almost everything can now be bought under a monthly payment model. And, by-and-large, interest in the subscription economy shows no signs of slowing down.

• “It’s the name of the game,” said Stephan Liozu, who has written several books on pricing strategies. “People are now just saturated with subscriptions.”

But now we’re onto the next chapter: Welcome to the age of micro-subscriptions.

• A monthly payment for the latest SaaS offering is too expensive? Switch to consumption-based pricing and just pay for what you use.
• Bored of the existing features on Snap? Sign up for the $3.99 per month premium offering.
• Don’t want to buy a $70 video game? Download one for free and pay for expanded features as you go.

There are indicators of increasing consumer animosity and evidence that companies may be testing the boundaries of the subscription business model.

• Probably the most visible is subscription fatigue with streaming platforms, which is causing a lot of trouble for Netflix and others.

• Software-as-a-service has become the primary method of delivery, creating headaches for some IT leaders who now find themselves with bloated application suites.
• Pasta is basically the nectar of the gods, but do we really need a subscription service for it?
• And in an instantly classic case of jumping the shark, BMW decided to start charging $18 monthly for a subscription to seat heaters. Rightly so, the move was ridiculed.

Companies are constantly looking for new ways to make money off of us, and the lure of the monthly fee model is bound to be too enticing to pass up.

• “There’s definitely a push for greater monetization,” Liozu said. “It’s moving away from freemium. And the recession obviously doesn’t help. Companies are in survival mode.”

Many businesses are used to offering a set of products or services as a bundle, which makes it easier to unbundle and sell as separate subscriptions. Couple that with concerns about an economic slowdown ahead and it’s a low-hanging strategy for businesses to try to both grow and diversify their sales.

• If done right, subscriptions can provide a more stable revenue stream, one that also gives companies the option to hike prices on consumers as a way to bolster revenues. Slack, for example, just raised the cost on its premium tier.
• Subscriptions also provide businesses much more intimate data on their consumers. That helps better personalize marketing to persuade users to spend more, which is becoming more critical in a cookie-less world.

Smaller payments work at getting us to pay for a product or service — something that we might have previously been getting for free or as part of an otherwise bigger package of services, like TweetDeck. They can also help alleviate some of the problems businesses face in managing subscription models.

• Netflix, which is trying to crack down on subscribers who share passwords, is hoping a cheaper tier will persuade those people to buy their own membership.
• And software vendors eager to avoid the central IT office are going directly to users with low introductory pricing options to get them hooked on the product.

Given the success, it’s likely we’ll see even more of this. For example, Elon Musk wants to lower the already rock-bottom pricing for Twitter Blue and charge it all upfront instead of monthly.

• Still, there are some industries where, for now at least, micro-subscriptions seem to be a distant dream. You’d be hard-pressed to find a major publisher that will let you pay to read just a single news article. And car subscriptions still haven’t quite taken off.

Ever since the Cambridge Analytica scandal at Facebook, backlash has grown against the “free” business model, one in which consumers are largely paying for the product with their data or some other non-monetary form of remittance.

But perhaps that wasn’t so bad. Corporations are going to get our information one way or another. Now, they’re also going to get our $2.99 per month. Maybe our only hope now is the hacker community.

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