Is the ‘forever transaction’ business model ethical?
The "holy grail" of relationships with your customer can be tricky to achieve, and even more complex to uphold.
ROBBIE KELLMAN BAXTER: People ask me all the time if forever transaction business models are ethical. And I think the reason they ask me is because they're dealing with subscription fatigue right now. A lot of people are really frustrated with subscription business models for a few reasons. The first reason is what I call product market fit. In other words a lot of companies build subscription models that aren't very good business models requiring you to subscribe in order to access something that you only need one time, for example. Or bundling in a lot of stuff that you don't want and then requiring you to pay for it. So a lot of people feel like hey, I used to love this product and now I have to subscribe to it and I have to pay more and I'm not getting what I really need. That's the first problem and that creates a lack of trust between the individual and companies. The second thing is what I call subscription overwhelm which leads to subscription guilt which is they say something like this. I love this business model. I love this subscription. It's really great except I never use it.
And so I feel like I'm wasting money and, you know, the magazines are piling up on my coffee table and it makes me feel bad when I walk by it. Or there's this organization ClassPass which has a subscription to be able to go to any gym you want and take different kinds of fitness classes. And I'm not using my credits and then I'm wasting them. So then what ends up happening is the customer feels guilty and they cancel. So in some ways you're like well, that's not really the fault of the business because our business has great value and the customer told me it's not my fault. But ultimately that customer cancelled so it is your fault and it is your responsibility to figure out how to fix that. The third reason for this whole kind of subscription fatigue is the easiest to fix but the most evil, I think the most unethical which is hiding the cancel button.
A lot of subscription businesses make it really easy. It's kind of like the Hotel California. You can check out anytime you like but you can never leave. They'll make you only cancel on Tuesdays by phone, in person, with a physical letter. That does extend your subscription maybe for a month or two but it creates a lot of I guess the opposite of goodwill, a lot of mistrust, a lot of resentment and it ultimately eats into your brand equity. The way I feel is it's ultimately unethical. Who wants to work at a place that builds revenue by charging people for things that they don't want and wish they could cancel. So when it comes to ethics and building out a forever transaction there's a pretty weighty obligation on the part of the business owner, the business leader to create a model that is trustworthy so that the consumer can take off their consumer hat, put on a member hat, stop looking for alternatives and stop worrying about whether they're being treated fairly. And I have to say that not only is this ethical good behavior, it's also good business.
Because when you have a customer who feels like a member, who's stopped looking for alternatives, who's stopped comparing your offering with other people's offerings, and who has agreed to pay you on an automatic schedule, you have kind of achieved let's say the Holy Grail of business models.
- How can you build a subscription model that continues to satisfy your consumer while avoiding fatigue and potential ethical downfalls?
- According to business consultant and speaker Robbie Kellman Baxter, you must first determine whether your service really requires a subscription in the first place. And if it does, be careful not to overwhelm the customer, which can lead to subscription guilt.
- Trust is just as important. Hiding the cancel button from your customers might keep them around in the short term, but this ultimately eats into your brand equity.
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