In this article we’ll discuss the advantages of monthly subscription models, and how this popular business model could be utilized in the developing NFT space.
As such, subscription services are nothing new and basically they exist even before the internet was born. A simple example is the local gym where subscribers pay a monthly fee to have access to workout devices they couldn’t afford at home. Now, there’s more to it than just ‘can not afford it’, a big element at play here is “convenience”. Convenience is the next main reason why subscription based models for goods and services are popular among consumers. Whether it is fitness, a meal box, a Netflix account, there is a ‘set it and forget it' mentality that fits incredibly well with the packed and fast-paced life of most people today.
Recently we witness that subscriptions now also gain ground in an industry that traditionally never experimented with their business model: the restaurant industry. Traditionally we say, since with the food aggregators and the virtual brands and dark kitchens a lot is moving. Therefore the Italian restaurant chain Del Arte (owned by the Le Duff group) wants to be a first-mover with the introduction of a monthly subscription. Against a monthly subscription of 35 euros – lowered to 30 euros the first month – and a six-month commitment, you can order a pizza or a pasta dish per day from a selection of seven recipes. Any additional order, bottle of water, dessert or coffee, will be duly invoiced to you.
The CEO of the restaurant group anticipates that after a peak in consumption, subscribers will end up frequenting the chain’s restaurants more reasonably, where they aim on an average of two meals per week. Also, not all products are part of the subscription model.
We spoke above the affordability and convenience that subscription models create for buyers, but what about the business? A first big advantage of subscriptions is that it creates monthly recurring revenue and when the churn of customers is low, it creates predictability on cashflows. And as any business leader knows (or at least the CFO), cashflow is king.
For the CMO and marketing department, subscriptions are a perfect way to build loyalty with customer referrals. Customer referrals are the single most powerful advertising tactics your company has at its disposal. Referrals are often the highest paying and longest lasting customers, and it gets even better, referrals come totally for free. The CFO will thank you as the business avoids ever increasing PPC (pay per click) rates or expensive banners. According to research, referrals are so effective that they influence 81% of people’s buying decisions, compared to the next highest influencer, TV ads, which account for only 65%.
People that sit in a subscription model will often stay longer (higher LTV) and pay more. It doesn’t come as a surprise that the longer a customer has a relationship with your company, the more they trust you and the more you become top-of-mind. You can already guess the sequence: the more they trust and think about you, the more they talk about you - thus bringing in more referrals, whereby the referred customers also get in that subscription model that you are offering.
We spoke already about the CFO’s pet, which is predictability of cash flow, but they will be more than happy when the combination of smart loyalty and an ingenious referral mechanism that is built into the subscription model will increase customer retention. A known industry benchmark says that the cost of acquiring a new customer is 6 to 7 times higher than retaining an old customer. According to Bain & Company, that means that a 5% increase in Customer retention increases profits up to 125%.
Now that we explained the basics of subscriptions and why businesses like subscription models, let’s continue with first a short recap of the capabilities of NFTs. No surprises here, you can sell or trade NFTs, you can rent them out, you can earn royalties on NFTs, their data is transparently available on the blockchain and its interoperability leads to interesting use cases.
Given the above capabilities, in the case your subscription would be an NFT, it would simply mean you can sell your subscription to someone else, you could rent it out, the subscription could be used in another app for a certain functionality. Selling or renting out their subscription could be interesting for the consumer in the case they binge watched like all the series that they wanted to watch. The other way round, maybe someone does not have the money (or not willing to spend) to pay a yearly subscription but they are willing to pay for a lower cost or simply rent it for a fixed period. Also think of vacation periods, where a subscriber suddenly has no time to watch or listen to their favorite episodes, and then simply rents out the subscription.
Of course, there are quite some practical in-betweens and to make the above model fully work, would require a whole shift in approach for the invoicing and accounting department. Imagine person A subscribes and you start sending invoices, just to learn that after 2 months the person A sold it to person B. The company should automatically send their invoices now to person B (based on the transaction as available on the blockchain). But then this person B really needs to send their invoice data to the company, not just a wallet address.
The north star we follow at Sayl is always “be pragmatic”. It’s great to have theoretic ideas and “wouldn’t it be cool that …” but the truth is we operate in a business context where businesses pay invoices based on solving an actual problem. So we came up with the handing out of vouchers, in a recurring fashion. How does that work?
Let’s get back to the initial case we spoke about, the Del Arte restaurant offering a 35$ subscription per month. When you own the subscription, you can eat every single day as you like, although restricted to certain products.
The restaurant marketing team defines a NFT that acts as the membership card, and hands out this digital membership card to the interested clients, via the 4 distribution channels possible in Sayl.
Secondly, the marketers use the voucher template functionality in Sayl to send out a voucher worth 35$ each single month, to each individual owner of the membership NFT.
The owners will find their monthly voucher in their wallet, and can go to the restaurant whereby they show their wallet to the waiter, who can scan and validate ownership of the monthly subscription using the Sayl Store Manager App.
Theoretic? No. Realistic. Yes! Can this be started today? Yes! How? Contact us and we'll show you ;-)