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The subscription business model is nothing new, its origins dating back to when newspapers began offering home delivery and the milkman brought milk to your front door. Evolving over time, modern-day subscriptions are becoming a hot commodity for the travel industry to boost revenue as it rebounds.
If you’re not sure how to modernize or implement subscription offerings in your travel brand, experts on Wednesday offered their advice at the Skift Loyalty and Subscription Summit online in discussion with Senior Travel Tech Editor Sean O’Neill.
“The first step for anyone thinking about implementing or building a subscription is orienting everything around your customer, and it seems like a no-brainer,” said Amy Konary, founder and chair of Zoura’s The Subscribed Institute. “Of course, we care about our customers but it’s not so much just understanding your customer but understanding what they’re trying to achieve. What is it that they’re trying to get out of travel? Or hospitality, or an experience, whatever that might be.”
With 20 years of experience in subscriptions, Konary emphasizes that customers aren’t a monolith, and doing some segmentation to try to create some groups is essential. It boils down, she said, to truly understanding the outcome customers are trying to achieve.
“And then really thinking about what are some ways that a service that you provide, or a combination of products and services can provide that experience or outcome on an ongoing basis, and that is the crux of a good subscription model,” she added.
For companies not familiar with this, Konary discussed best practices for introducing subscription models to companies by utilizing relatable examples.
“All of us probably subscribe to something right now,” Konary said. “There are so many subscription models in our lives, whether that be an Amazon Prime or Netflix or Disney Plus. And if we think about what are some of the reasons that we continue to pay for these services or that we pay that bill every month, it’s because you’re seeing ongoing value.”
Konary said it’s important to have the ability to both deliver ongoing value to a customer as well as anticipate how to help them discover and experience that value.
“So, the most important thing is creating pathways for your customers to use your product and service pathways for them to expand the usage, over time. And pathways for them to see value in new ways, whether that’s providing recommendations, whether that’s expanding your ecosystem,” Konary said.
This will require a systems approach, centered around your subscriber, which Konary said is very difficult to do at scale, but necessary in order to be successful in the subscription economy.
And as for some travel executives remaining skeptical about subscriptions being around for decades and not offering anything new for travel brands? Konary agrees to an extent.
She acknowledged subscriptions and the financial components of paying for something over time have been around for years, while pointing to differences in the modern model.
“The ability to really understand how your customer is seeing value from the products or services that you provide, a membership program, a loyalty program,” said Konary. “That’s a financial arrangement that gives the customer access, maybe a value, but it does not give you the opportunity to participate in that value creation with the customer. The way that things like mobile platforms and applications allow you to do that today.”
The coupling of a relationship that happens to have a financial component associated with it, as well as digital transformation enabling you to build these kinds of enduring relationships with customers, is what makes the modern subscription approach really different, she said.
“What we learned as well during the years is that you have to give value all year long, and that’s not easy in travel,” said Michael Ros, CEO of travel startup Bidroom. “You book and travel maybe a few times per year. And that’s why I noticed it isn’t going to work in travel.”
Ros, who since late 2015 has been doing travel subscriptions and flushing out its business-to-business to consumers partnership, said he realized a few years ago, when Bidroom was just offering discounts on hotel stays, that it’s not what you use all year long.
“So, what we implemented was much more perks benefits the whole year long, so co-working discounts, other discounts,” Ros said. “So, people who have a bigger membership they’re using it all year long for savings on travel, getting perks, but also partner perks with much more than that. It’s really important that you keep giving new value and what we also realize, is that you give value all year long, but also develop new value.”
Ros advises that adding new services constantly will keep improving your product. He also said it’s essential to continually remove friction, making it easier for clients to subscribe.
“It easy for some companies to say we’re just moving from transaction focus to relationship and subscription service, but it’s a completely different way of thinking in maintaining relationships,” Ros said.
In order to implement a subscription model without middlemen, Ros built his own infrastructure connectivity allowing Bidroom to connect directly with property management systems (PMSs) and channel managers to build a platform for hotel partners to manage perks and discounts. Ros said the key was overcoming the fulfillment challenges that travel brands face, while building his company’s partner and traveler relationships.
Ros believes staying on top of churn is crucial because if members are leaving soon after joining, companies have to acquire new ones again. But by offering yearlong benefits, perks, and discounts, Ros found longer-term users help reduce churn. Simplifying payments also helps, he said.
Regarding customer desires for instant gratification possibly being a hindrance for travel, Subscribed Institute’s Konary said you do want people to see value quickly and have that path to value, but you also want them to see the value in an enduring relationship with you.
“So, some of that quick value might happen at signup, maybe that’s part of a trial period,” Konary said. “But there is an enduring piece of the relationship and that’s the piece where customers are really going to enter into that financial agreement with you, and were subscribing, either at a value-based or a pay-as-you-go, makes a lot of sense. So, I think you do have to manage both levels.”