Over the summer, we wrote in this space about how DTC subscription models trailed new SaaS subscription trends in terms of thinking and execution (and that those trends more mirrored Big CPG playbooks than traditional SaaS models).
The topic, generally, has come up for us recently.
A couple weeks ago, Daniel McCarthy, a marketing professor at Emory University wrote a series of tweets about how subscription brands are beginning to look more like non-subscription brands as they get more flexible with subscription management and churn mitigation efforts.
If you read our piece and then read Professor McCarthy’s tweets, you’d probably imagine we felt a bit vindicated.
But, then, this week, we found a 2002 paper from Byron Sharp suggesting that a company’s business model was a flawed way of analyzing such a thing. Instead, he suggested, we might want to look at consumer behavior within the category to classify the business as either a “repertoire business” or “subscription business.”
From the paper:
“This distinction is based on differences in consumers’ repeat purchase patterns, so it may well turn out to be more useful than distinctions based on product characteristics, such as ‘product’ versus ‘service’, ‘high tech’ versus ‘low tech’ and so on.”
Well, shoot, that’s pretty smart.
And it explains a lot of what McCarty was talking about and it explains a lot of what we were talking about, too.
To the extent we’re blending the lines in a new approach to CPG, it’s worth thinking less about the business model we’re building and more about the purchase patterns of our customers.
The question we all should be asking, then, is more about the prevailing way in which customers buy our categories. For most in CPG, as outlined in Sharp’s paper, that means regular purchases from a number of brands within a category, but not from one brand within a category. Loyalty, then, is less a function of a subscription model within a “repertoire” business and more a function of repertoire being limited to one brand for a set time period within a “subscription” business.
In other words, a solely loyal customer is quite rare.
To pull another quote:
“Your customers are really other people's customers who occasionally buy from you.”
If this is the case for you, too, consider how your customers’ actual behaviors fit with your desired behaviors. You may have to adjust according.