This past week I shared an article out on my social channels from Forbes Magazine written by Shep Hyken, a friend of mine, about Burger King’s disruptive approach to selling coffee in the US through a monthly subscription. Essentially by signing up through their APP at $5/month auto billed, “members” are entitled to coffee daily. Of course, as I noted, subscription-based services are not new, but this is certainly a first for the competitive coffee industry. And anyone playing in that space knows, it’s really more about breakfast food item sales and loyalty. The coffee is a loss leader. If you’re not a follower on social media (but you should be!), here’s a direct link to that Forbes article about Burger King.
The article received significant traction, so I thought I’d dive into the subscription-based membership model a little deeper this morning, and discuss the potential disruptive forces at play if this were to be leveraged in other industries.
Subscription services have exploded recently. Just check your monthly credit card statement. Whether it be Spotify, Google Play, Apple Music, iCloud storage, software services, gym memberships, food delivery, or even razors (Dollar Shave Club members out there?) companies have latched onto subscription services. And for good reason. It makes cash flow easy to predict, creates loyalty and extends use. For customers it spreads out costs, lowers resistance to higher priced items, saves time, eases use, and often comes with additional perks.
But where I think the real potential exists, is where the subscription model gains customer loyalty, and allows a company to leverage and pivot into new areas or industries. We saw that with Amazon Prime. For a subscription fee to Prime, purchases made on Amazon receive expedited and faster shipping. Prime makes people loyal to ordering online with Amazon. But it was how they extended their Prime membership benefits into Amazon Prime Video that was brilliant. Prime members are able to access movies, TV shows and original content. That has allowed Amazon to compete in a completely new category – home entertainment, and now with original content, in the creation of programs. Talk about industry disruption by a big player.
Of course, you don’t need to be an Amazon to see the potential in playing like this. I can think of lots of industries where there could be subscriber-based membership model disruption. How about fitness clubs that bill monthly with loyal members getting into healthy meal prep services or supplements? How about “all you can eat” style education and courses availability behind a subscriber firewall? Why not sell access to electric car charging station services like monthly data plans, and while you’re at it link it to a dry cleaning drop off/pick up services or a coffee shop? Or forget the station altogether, and shift to Google or Apple home, and subscribe to music, entertainment, and all other AI services and get free power charge for vehicles in the home? Or maybe Facebook could switch to a subscriber member model monthly for an ad free feed, and pair it with TV and movie content access. They already have Facebook Watch TV in the US market.
The mind boggles at the potential. The only thing I know for certain is that digitization has enabled disruption of products, pricing, promotion and distribution. And it has made it more and more likely that your next competitor will actually come from outside your present industry.
Feeling unsettled? It’s the future. We need to learn to live in it. Maybe pop a few of those chocolate Easter eggs left over from the weekend as medication!
… And yes, I DID DRINK that coffee. It was fine, but certainly not spectacular. Nothing memorable, especially after all the great coffee drinking experiences I had in Australia recently. And they don’t have a separate coffee bar like McDonald’s does with “McCafe.” But in Burger King’s defense, it likely doesn’t much matter. As long as the coffee is “good enough” to be competitive at the relatively low cost of $0.17/cup if a subscriber went every day of the month, it will win loyalty for the items where they will really make their money – like breakfast sandwiches. Even if a $5/month subscriber visited once a week or a little more, it could likely be justified.