Firehose #182: 💰 Subscription addiction. 💰

First, the subscription service must get better the more your customers use it.

Consumables like food are great opportunities for recurring subscriptions. Nearly 30% of Doordash customers opt-in to its Dashpass service because doing so unlocks better economics for those customers, who have a recurring use case for takeout food.

I don’t have a neat graph of market cap over time for consumer subscriptions, but the market cap of these businesses in aggregate is likely larger than for B2B. Legacy consumer utilities like Verizon ($250B market cap) and Comcast ($236B) have been subscription oriented for years, but internet native companies have built even more value with subscr... See more

In short, subscriptions are not a panacea. Price changes do not solve product/market fit on their own. But, if your product gets better with more usage, addresses a naturally recurring behavior, and has a potential “upgrade tier” of users, a subscription model could be very successful.

Second, the subscription must tie to a recurring behavior. The causality must flow from the recurring behavior to the subscription, not the other way around.

Third, a subscription offering should self-select your best customers and give others an aspirational path.

What’s most impressive is that Netflix has increased prices many times in the last decade, on the order of ~10% each time, with little evidence of increased churn.

Upgrade paths can even exist without a de facto subscription. Both Chewy and Stitch Fix* offer an auto-ship feature, which gives meaningful discounts to the most active customers in exchange for predictable revenue.

Subscriptions are attractive because they are predictable, but not every product or service is a natural fit for subscription.