Disillusionment
If you were to overlay Geoffrey Moore’s Crossing the Chasm visualization with Gartner’s Hype Cycle wave, you end up with a curious (yet maybe predictable) scenario:
The trough of disillusionment (from Gartner’s Hype Cycle) overlaps with Moore’s Early Majority.
Though the two frameworks are different (Moore’s about a single product, Gartner’s about a product category), this is worth spending a minute on, as that trough hits at the very moment most products fail to cross the chasm. No wonder?
We raise this today as there have been rumblings stirring now about subscriptions, a product category within DTC that has most-definitely crossed the chasm. Except that’s with brands.
Perhaps, though, that’s the wrong way to look at it. The better way might be through the lens of the consumer, and that’s the lens taken by Twitter-famous business professor Daniel McCarthy and Web Smith at 2PM, who both wrote some “disillusionment-style” pieces on subscription in the last month.
In McCarthy’s, an academic research paper using credit card panel data, he and his co-author found that cohort-level churn worsens over time, meaning less and less customers are likely to be high-value subscribers the more a brand grows.
The problem for the category, it seems, is that McCarthy’s analysis period was only a few years. And a few years isn’t enough to build a durable business.
Smith, in his newsletter this week, outlined a number of challenges, but this was perhaps the most representative:
Let’s face it: the subscription model is hurting. This is a problem, especially for food-based brands. Now add inflation and other cost of living increases and you have a recipe for increased churn, poor sales efficacy, and a less-than-optimal marketing operation.
When viewed through the consumer lens, you could argue that DTC subscriptions are still well within Moore’s early adopter stage, and that the vast majority of the consumer market hasn’t yet … ahem… subscribed to the idea of subscription.
And it seems this is what McCarthy and Smith are hitting on.
Why bring this up?
Not to dump on subscription, but for a simple reason: even a business model as hyped as subscription for DTC appears to be hitting its moment of disillusionment.
Is it valuable? Yes. Is it going to continue to grow? Probably. Will it be more popular again in the future? Sure.
But it probably won’t be talked about with the same fervor it was two years ago. That’s the thing with trends, whether it’s B2B SaaS or consumer technology.
Subscriptions, then, may be like Keto. Bigger than it was before the hype, but much more silent.