Web giants keep clients’ loyalty

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If you have ever worked in sales then you will know how hard it can be to close a deal.

There are so many things which can scupper a transaction - from competitors offering a better price, to the customer simply being distracted by other priorities.

And even if you do make a sale, there is no guarantee the customer will return. All the time and energy invested into getting someone over the line - from the initial marketing through to after sales support - could be wasted. So it is not surprising companies are increasingly looking to subscription models as a way to generate recurring revenue. Netflix, Spotify and Dollar Shave Club are examples of multi-million-pound subscription businesses which are thriving in sectors that once relied on one-off transactions.

Smaller organisations are increasingly exploring subscription models too. Independent publisher Galley Beggar Press, whose books have won many prestigious literary awards, now offers readers the option to become a ‘buddy’ and benefit from a range of goodies - from limited editions to launch invites - in exchange for an annual subscription.

Luxury make-up and skincare brand Beauty Pie offers customers the option to pay a membership fee each month, and then benefit from heavy discounts.

All this helps guarantee revenue and secure the future of businesses which cannot rely on traditional sales channels. And in theory it means the business only needs to close a deal once. In reality, of course, they all need to retain the ongoing loyalty of their subscribers.

This is why Netflix is investing $8bn this year in original content. And it is why Amazon has invested billions into the infrastructure which enables parcels to be delivered quickly to their Prime customers - along with a host of other benefits, such as streaming services.

Retaining subscribers can be very expensive - but it is still usually far cheaper than churning through existing customers in favour of new ones. And as an added bonus, satisfied customers will make recommendations to their friends and family, one of the most efficient ways to grow a business imaginable.

By Guy Cookson, Partner at Hotfoot Design