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What is Wrong with Subscription Marketing?

Marketing Horizons What is Wrong with Subscription Marketing

Memberships, subscriptions, loyalty programs—relationship marketing models of all sorts—have long been a staple of the marketing toolbox. But why is Peloton in such deep trouble right now? And Noom postponed its IPO? Join us as Mark DiMassimo explains what’s really going on, and how we can fix the apparent problem with membership marketing today. Spoiler alert: It’s not the model itself, you’ll be happy to know. Tune in for Mark’s advice on how to motivate customers to “start, stick and stay.”

Cyndi Greenglass: What's going on with subscription and membership models?

Mark DiMassimo: There’s good news and bad news. The good news comes out of the context of a very difficult marketplace for folks. There are a lot of folks out in Silicon Valley working through marketing technology and media technology that are changing that stuff so fast that people are being driven over the edge.  Netflix literally says, our strategy is to compete with your sleep. What's legitimately happened in the marketplace is that people want to have more sense of agency and control over their lives. Products alone don't help enough. Memberships, true relationships with continuity go deeper, and they can help more. There's a really good market-based, consumer-based, person-based reason why memberships and subscriptions have been taking off. The dark side is that any human social truth is going to also become a cause. What happened is that the investors saw in subscriptions and memberships ongoing, predictable revenue. They started to value the profits and revenue of subscription companies at a much higher multiple than other companies. They kept bidding up the prices of these companies, which you know predictably drove, especially the leaders right over the edge. The only way to keep up with them was to start to do bad business and take the head risk. The leadership of the company has to choose between looking worse to the money - the people who give them loans and investments - by being moderate in a moderate environment, or by taking the huge risks of following the money.

Cyndi Greenglass: During the pandemic, I signed up for a home cooking subscription box. I wound up canceling it, and then never heard from them again. Once they got me on board, and they did nothing to either retain me or activate me.

Mark DiMassimo: The University of Pennsylvania just published the results one of their mega studies, and these behavioral scientists trying to figure out how to get people to sustain habits. The number one thing was a win back strategy. Make it easy for people to come back who have lapsed and yes, incentivize them a little to come back. We did work a couple of years back for Proactive. They had a successful continuity program, but then they sold themselves to a package goods company. The package company said, “we've got an idea for you to make more money, you're going to now become a products company like an e-commerce company.”  One result of that was that they get new people using Proactive. It's for acne, and one thing about the product working is six weeks in, you're actually worse. If it's working, it gets better three months in. They used to tell people that. Now, they weren't preparing people, and four, six, eight weeks in, they were trying to cross-sell them to other products while they were miserable with the first one. They were losing sixty, seventy, seventy-five percent in any given month of the people they spent so much money to acquire.

Cyndi Greenglass: Investors want to see the acquisition numbers. How do you get them excited about spending money on retention or reactivation when they just want you to get more members?

Mark DiMassimo: I generally start out, and I say, let me guess, you spend enormous amounts of money on acquisition. I pause and without fail, they say, yes, we spend so much money to acquire our customer. Then I say one, two, three months later, you're not seeing the value from that customer. How many of those customers actually stick? The reason that they don't spend on customer marketing is they don't focus on those moments that matter, those key moments where people are lost or gained. But most importantly, they have no sense of optimism that member marketing works because they don't know how to do it. They don't like costs. What they like is investments that return. What I say is, what if you could reduce your member churn by ten? What effect would that have on the value of your business or on the return on your marketing dollar and let them look at that. Then you have to turn and look at it from the other side, which is behavior. Our head of strategy was working on a gym, and she looked at where folks were lost. What they noticed is that fifty percent of the people who get to the parking lot don't come in because they feel unattractive and the way the gyms were set up, you had to walk in front of everyone at the gym in order to join it. They experimented with creating a separate entrance and a private sign-up process.

Ruth Stevens: Where is membership marketing headed?

Mark DiMassimo: It really comes down to what's more valuable: transactions or relationships. I think the I think the answer from the from the consumer's point of view is pretty obvious that relationships that serve me are a lot more valuable. Every company is going to want to go beyond the transaction to the relationship, and there's just so much learning and development to be done.

Key Takeaways/Three Little Piggies

  • Subscription and membership marketing is still a marketing megatrend, driven by changing consumer needs.
  • Its apparent downfall recently has to do with unrealistic expectations among investors, and the mistakes of inexperienced marketers.
  • The thinking behind behavioral economics is not new. It’s just called something different today.

Marketing Communications Today presents Horizons, it’s forward-thinking, looking ahead, through the front windshield and beyond, into the marketing future. Join Cyndi and Ruth bi-weekly for new ideas, technologies, tools and strategies that are emerging to help marketers navigate over the marketing horizon.

Meet our guest

Mark DiMassimo

Mark DiMassimo is the Founder and Creative Chief of DiGo (DiMassimo Goldstein), the industry-leading agency in Positive Behavior Change marketing, which he founded in 1996 in New York City and has appeared on Inc's list of America's fastest-growing private companies four times and been named an Adweek Gold Best Agency. DiMassimo's ideas and creative work have helped build dozens of major brands that are pioneers in their respective categories. He was named a “Future 50 CEO” by SmartCEO magazine four years in a row, was profiled in the New York Times bestselling book, "Leadership Secrets of the World's Most Successful CEOs," and his work has won numerous Effie Awards from the American Marketing Association, among a slew of other awards for excellence in advertising creativity.

Meet the hosts

Cyndi Greenglass

Cyndi W. Greenglass is a founding partner and president at Livingston Strategies, a data-informed, strategic consulting firm that helps clients develop, execute, and measure their customer communications with a close focus on results. Cyndi has razor-sharp strategic skills matched by impeccable on-the-ground savvy and tactical abilities. She is an Adjunct Instructor in the Data Marketing Communications online master's degree program from West Virginia University.

Greenglass has twice been named into the Top 100 Influential BTB Marketers by Crain’s BtoB Magazine and was the 2012 CADM Chicago Direct Marketer of the Year. She is a member of the Board of Advisors for BRAND United and has taught, trained and presented at over 50 conferences throughout the world.

Ruth Stevens

Ruth P. Stevens consults on customer acquisition and retention, for business-to-business clients. Ruth serves on the boards of directors of the HIMMS Media Group, and the Business Information Industry Association. She is a trustee of Princeton-In-Asia, past chair of the Business-to-Business Council of the DMA, and past president of the Direct Marketing Club of New York.

Ruth was named one of the 100 Most Influential People in Business Marketing by Crain’s BtoB magazine, and one of 20 Women to Watch by the Sales Lead Management Association. She serves as a mentor to fledgling companies at the ERA business accelerator in New York City.

Interested in growing your career with a master's degree in Data, Digital or Integrated Marketing Communications? Request more information today!

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