January 10, 2021
Subscriptions are the community dream—the reality is often different
topics: articles, paid-communities, business-modelsRosie Sherry
Hey everyone. I’m here to give y’all a reality check. You know I like to be ‘rosie’, but sometimes you have to be ‘realistic rosie’! 😬
The Subscription-Model Hype is Real
The subscription model is all the hype in the community-building world right now. Who would say no to a sustainable recurring model for any business? How could anyone say no to money dropping money into the bank every single month, or year? But, like I do when I peep into the bigger startup and VC world , I constantly have to remind myself of the hype, and the excitement.
Not only do we get excited about the possibilities and forget about the reality of needing to do the work. 🙈 We can all easily be guilty of pushing on for a subscription model that simply may not work.
The subscription model is the dream for many people and industries, but dare I say, it is still in its infancy. Not just from a tech perspective, but also from a customer psychology perspective. It will take time for people to get accustomed to niche subscriptions, not just from a payments perspective, but also from the perspective of developing new habits to make use of it.
I honestly think the next few years could be interesting in this space, but at the same time, as community builders we have to think about what the customers want (value), not what we want (that recurring revenue).
Subscription businesses are hard
Subscriptions are a lot like SaaS. Jumping into SaaS first is possible, but risky. The reality is SaaS is hard. I’ve seen stories of so many people trying to dive head first into building a SaaS, and whilst I don’t have specific data on this, from what I see, often they take years to build up into anything significant, or they fail. SaaS is complicated. From all angles. The validation. The tech. The processes. The customer support. The (constant) innovation. The growth and the churn. 😭 There is just so much going on. And I haven’t even mentioned the accounting and legalities.
We can say the same for subscription-based community driven models. Diving into a subscription-based community model first is possible, but risky, and most likely we should probably assume it will be slow to get off the ground.
I think with subscription-based community models, it is different, and perhaps even harder than SaaS to convince of the value add because in theory, most people can survive without a community.Would they necessarily be better off? I believe that we need the connection and sharing of things, and that’s precisely why communities exist. But it’s super hard to quantify knowledge, experiences and the opportunity to connect.
100, 1000, 10,000 or 89,878, true fans?
When it comes to community subscriptions and what to charge, it becomes tricky because there is never a right or wrong way. There is only the way you end up going with.
I think generally, you can get these kind of people and situations:
- Freeriders: There will always be people who want things for free.
- A one-off payment: The people who get invited because they have purchased something, at some point in time, but it’s not necessarily a recurring subscription.
- Dipping toes in: Then you’ll get people who are starting to open their options to paid subscriptions and are open to $50 - $100 per year type stuff
- Professional budgets: Those who appreciate constantly learning, (I’m one of those), will easily spend hundreds or low thousands over the course of a year for things that help improve their knowledge and earning potentials.
- Company budgets: often companies can sign stuff off in the thousands, training budget allowing, but it has to fit into their processes.
- Exclusivity model: there are people, it seems, who charge much, much, more for things. $1000, $10,000 per month and upwards. Ka-ching, but also a whole different world to one that I’m into. It all comes down to the possibilities they offer and how much the people are willing to pay. And of course, whether you want to operate in that world.
From my rosie perpsective, you should make the true fans model what you want, depending on the type of community you envision building.
- 100 fans might mean $1k per year charge
- 500 fans might also mean $1k per year, or maybe $500. It might also mean you like the idea of planning to grow a small team.
- 1000 or 10,000 might mean $50-$100 a year
The key here is to play around with the math and what you think your people would appreciate. Don’t get too fixated with the nice rounded 100 or 1000 number.
Charge more, or less. 🤷🏻♀️
There’s a phrase in the startup and indie world to ‘charge more’. In a nutshell, people are encouraged to charge more to become more profitable and sustainable. Entrepreneurs are often too scared or timid to charge a higher price. (and that’s okay! It can be scary!) Businesses can succeed or fail based on their pricing.
I don’t really have much of an opinion on this, apart from the fact that people should be aware they can charge more, if that’s what they want and believe they can achieve. It’s also easy advice (for white men) to throw around, but in practice it becomes harder for those that have more challenges in their life. Charging less might guarantee their monthly rent and food for their kids, maybe that is good justification for not charging more (right now).
We must remember that to be an entrepreneur, you need to be human first.
I like what Anne-Laure of NessLabs is doing. Her community is $50 per year. And she’s basically not made (m)any promises about it. It’s a place to gather like-minded people, and some access to already existing resources. Along the way she has done a course (within the $50 price). She gets told to raise her prices, but really, her revenue as an ‘indie hacker’ is doing pretty well.
The ‘charge more’ business people will say $50 a year is not enough, but maybe it is the sweet spot to allow people to afford and budget for other subscriptions in their lives. Also, maybe there are enough people to reach that are loosely interested in the things she is doing. At $50, they will likely renew. Anything above $100, they may reconsider.
‘Charging more’, in any situation, will naturally alienate people. And that’s fine if that aligns with what you want to do and the market you serve. Also, the more you charge, the more people are going to consider each subscription renewal. I think this is super important to bear in mind. This means the more time you will have to keep people happy, prevent churn and invest in constant growth activities.
I’ve always opted for charging less, then increasing prices every year or so. In practice, I’ve done this for events, but not necessarily membership subscriptions. This worked for me as an indie founder, it also allowed me to build up confidence over a period of years.
Adding constant value in communities is hard, and forever changing
Things usually seem exciting at first. People want to believe in what you are offering, they jump in, excited, but slowly disappear. The constant quest to figure out what people need from communities is real.
You can offer valuable things, but if they are not using it, then what is the point? Sometimes it’s about connection. Other times it’s about knowledge, news or trends. But more than this, it’s about the habits of the people you serve. How can you help them create the habit to show up and invest time to be a part of it?
And once you think you’ve figured it out, something will pull the rug from under your feet to make you reconsider everything. The obvious example here is COVID, but fast tech or industry changes are just as guilty of making communities and businesses become irrelevant.
Subscriptions are maybe the goal
I say maybe, because by saying maybe it keeps our mind open to other business models too. If you have your mind focused on subscriptions, then you’ll most likely fail to look at and educate yourself on other approaches.
It’s easy to get carried away with the hype of how wonderful subscription models are. Nothing wrong going for them, but I think it’s important to bear in mind that:
- Converting people to subscriptions is psychologically much harder
- You can do subscriptions alongside other models
- Maybe other models will end up working better, who knows?
If we are open minded about creating other sustainable revenue streams, what should we be thinking about?
- Courses - these can be great for focused activity, and companies and people are usually open minded about spending money on education.
- Digital products - you could package up some content that you already have to sell as a single purchase. Personally I think the key here is to have something that potentially pulls people into your membership at a later stage. Allowing people to purchase on a single and lower price point is a good and basic trust building exercise.
- Events - obviously IRL events are hard now, but I’m definitely seeing a slow uptick in people paying for online events. Making them paid, even if it’s a small amount, brings in more commitment. It’s also worth knowing that many bigger companies are simply unable to get approval for subscriptions, but they have no problem paying for events at a much higher price point than a subscription. Go figure! 🤷🏻♀️
- (Community) digital gardens - we are working towards this with Rosieland. I feel like such a geek at how excited I am about this. Our Notion is steadily gaining ground, and personally, I believe this kind of work is immensely valuable long term. Also, Marie Dollé points out Nat Eliason and Sari Azout as examples of this too.
- Consulting, freelancing, and productized services - I think people dismiss this too easily, saying that they want to move away from services. However, working with your people is not only a great way to make some money, but it also allows you to get to know their real needs, hopefully better than anyone else.
- Sponsorship & Advertising - this might not be for everyone and it can be hard to find the right balance. It’s perfectly possible to make decent money with sponsorship deals. Personally, I’d never rely on it 100%, but as part of an income strategy, it can work well.
- Become the expert in your niche - maybe charge for things like speaking and podcasts. Or write stuff, like Rob Fitzpatrick has. He now makes $10k a month from book royalties and is teaching people how to do it.
- Memberships: While subscriptions are associated with transaction — purchase a subscription and get a year of content, etc. etc. A membership model relies on strong relationships between creator and their community. Increasingly, we’re seeing more content models ran this way.
The importance of these should not be underestimated, it’s not all just about making money. Each of these things can support your flywheel effect. Having different things on offer, connecting with people in different ways, excuses to talk about things you are working on, all these types of things keep the conversation and community going forward.
Educate yourself with realism
Subscriptions are all the hype right now. And when the model works, it’s a great revenue stream. But in the excitement and hype, we need to remember that subscriptions aren’t some magical business model—they take a lot of work and require that you’re constantly creating value for people who many not understand the value of a community membership.
The subscription model is doable, I just wanted to present some considerations and alternatives for you to think about before diving head first into the subscription model.