Consumers want “access over ownership,” says Sago Mini’s Anum Naseem. How did we get here?

Jun 19

In our second episode of the Doing it Big podcast, we chatted with Anum Naseem from Sago Mini on the subscription economy, growth & personalization. Here’s a recap of what we learned.

Below are some transcribed highlights from the interview, lightly edited for length and clarity. Stream the audio version for our full conversation.

Why do you think that subscriptions are such an attractive, emerging model?

Yes, that’s a really good question. And I think that there are a lot of different factors at play, but I would say that the bigger picture or sort of the overarching economic perspective is that consumer behaviour has changed. There’s been a shift to where people are now showing a preference for access rather than ownership. People have started to realize that we don’t have to have homes littered with CDs, DVDs and books. Especially in urban centres, a lot of people don’t own cars or bikes or even clothes anymore. And instead we’re subscribing to all of these things as services. It’s the same for businesses, where SaaS and cloud solutions have replaced traditional servers or other on-premise hardware. I think that this is happening because consumer expectations are changing. Consumers want access to things when they need it, not all the time — they want it at an affordable price and at their own convenience. And even more than that, now they want a personalized service, so businesses have to respond to that. But from a business perspective, the bottom line for subscriptions means basically guaranteed revenue over time, which is why I think that businesses find the model so attractive.

Is growth optimization is any different in a subscription environment as opposed to a one time purchase?

Yeah, for sure, it’s a different ball game. With one time purchases, churn and optimizing lifetime value was always important, but it was never the primary thing. That’s just because of the economics of it. Generally, for one time purchases, your cost of acquisition was repaid within one purchase, and your margin is built into that. With a subscription business on the other hand, your churn can really make you or break you, because usually the amount that a user pays up front in month one or month two is lower than if it was a one time purchase. So if you lose them, let’s say after a month or two, you probably won’t be ROI positive. So the emphasis in a subscription environment is always to provide long term value to your customer, because without them sticking around, the economics just simply won’t work. And then, because of that fundamental difference, I would say that there’s a few pricing or acquisition strategies that are very specific to subscriptions. One example is free trials. Like I said before, the long term value of your product is so much more important, as opposed to when you’re selling one time products. When you’re selling a one time purchase, you may be looking to solve a short term need. But on the other hand, the reason that subscription services can offer free trials at all is because subscription companies are sure that what they have to offer will give their customers value over a long period of time so they can afford to provide the product or the service for free for a limited period of time if it helps to acquire that customer for the long term. And then the second interesting thing that I found is to understand whether your experiment is ROI positive or not, you have to wait months because with subscriptions you need to see not only how the experiment impacts conversion, but you need to see how it impacts conversion and churn over time. Because just increasing conversion is not your gold. You want to increase conversion while keeping churn stable or even reducing it. So that’s where there’s a whole world of difference between a one time purchase where you’re really just focusing on your conversion rate. And after an experiment, at least after you know, a few weeks depending on your traffic, you can assess its impact. Yes, I guess with subscriptions, you have to be really sure that the pricing or acquisition experiment that you’re running, is gonna have a positive impact — because otherwise you’ve potentially wasted a few months.

How are you thinking about churn and ways to reduce it?

There’s two basic types of churn: voluntary and involuntary. Voluntary churn is where customers are making a conscious decision to stop paying for your product or service. And across the subscription industry, about 70% of all churn tends to be voluntary. So that is the type of churn, especially for smaller businesses where most of your attention needs to be. Involuntary churn is basically when a customer subscription gets canceled because their payment hasn’t gone through. Maybe their card has expired or their bank declined the transaction for some reason. Though this is a smaller proportion of all churn, over time this can significantly harm your business. And there are a lot of standard practices around this. So, for example, you can set up an email automation that detects that a customer’s card is about to expire. So you automatically email them saying “hey, please remember to update your card details”. So a lot of these little things can really help.

And finally, Anum’s highly-anticipated 1 BIG thing:

My 1 BIG thing is that you can’t go wrong if you listen to your customers — and I mean really listen. Understand what they need, and if you constantly look to keep evolving your product or service to meet this need in exciting and innovative ways, then you can’t go wrong.

About Anum Naseem

Anum Naseem is an experienced product manager with a focus on eCommerce & digital product management, workflow design, product roadmapping, strategy and growth. She now brings several years of experience working with some of Dubai’s largest multinational and multi-category brands to her role at Sago Mini, an award-winning kids app & toy company, where she’s currently the eCommerce Product Manager.