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Robbie Kellman Baxter has been
advising organizations on business
strategy for 20 years. Her clients
have included solopreneurs and
venture-backed startups as well as
industry leaders such as ASICS, Netflix,
Electronic Arts, and The Wall Street
Journal. She has worked with nearly
100 organizations in over 20 industries
on growth initiatives.
A sought-after writer and keynote
speaker, Robbie has presented at
leading universities, associations,
and corporations, as well as before
corporate boards and leadership teams
around the world. Robbie has created
and starred in 10 video courses in
collaboration with LinkedIn Learning
on business topics ranging from
innovation to customer success and
membership.
As the author of The Membership
Economy: Find Your Superusers, Master
the Forever Transaction & Build Recurring
Revenue, a book that has been named
a top 5 Marketing Book of the Year by
Inc.com, Robbie coined the popular
business term Membership Economy.
Robbie’s expertise with companies
in the emerging Membership
Economy includes SaaS, media,
consumer products, and community
organizations.
Before launching Peninsula Strategies,
Robbie was a strategy consultant at
Booz-Allen, a New York City Urban
Fellow and a Silicon Valley product
marketer. Robbie received her MBA
from the Stanford Graduate School of
Business and graduated with honors
from Harvard College.
© Business Expert Press 978-1-94944-387-5 (2019)
www.businessexpertpress.com
Growth Strategies
for Subscription-
Based Businesses
Robbie Kellman Baxter
Principal, Peninsula Strategies
Abstract: Subscription-based companies, which now
­include those offering software as a service (SaaS) ­using
the Cloud, have special needs. This is the first in a se-
ries of three articles that will discuss specific strategies,
metrics, and repositioning actions these companies
­
must use to prosper. The author is a consultant who spe-
cializes in growth strategies, market assessment, mar-
ket segmentation, establishing metrics, and other issues
that these companies face.
Keywords: business model; churn; marketing software
as a service (SaaS); membership; pricing; strategy;
subscription
In 2015, when I first published my book, The Member-
ship Economy: Find Your Superusers, Master the Forever
Transaction & Build Recurring Revenue, I had to convince
executives and entrepreneurs that nearly any business
could benefit from using subscription pricing to drive
recurring revenue, engagement, and growth.
At the time, subscription-based businesses (SBBs)
were mostly limited to content companies (news, mag-
azines, video), clubs with annual dues (gyms and as-
sociations), and so-called “continuity” businesses like
book-of-the-month clubs. A few software vendors were
offering customers a chance to subscribe to software
hosted on the vendor’s servers instead of hosting the
software at the customer’s office or home, a practice
known as “software as a service” (SaaS).
I tried to point out the many benefits of subscriptions
and the applicability of subscriptions to virtually any
kind of business.
Today, just 3 years later, there are literally thousands
more SBBs. And many of the world’s largest companies
are trying to figure out how subscription pricing might
work for their businesses.
Expert Insights
1
 Growth Strategies for Subscription-Based Businesses
In this article, I will explain what de-
fines an SBB and the benefits it provides to
both the customer and the company. Most
importantly, I will demonstrate how your
company can apply principles of member-
ship to grow your own SBB and enjoy those
benefits.
Introduction to Subscription-Based
Businesses (SBBs)
An SBB is just that, a business that has, at
its center, a subscription pricing model.
If you walk into a store and buy a book,
it’s an anonymous transaction, and the re-
lationship between you and the bookstore
ends when you pay money and receive the
book. Now the book is yours. You don’t have
to pay the bookstore any more money and
the person selling the book doesn’t have to
give you any value.
Compare this with Kindle Unlimited by
Amazon—in this model, you pay Amazon
on a regular recurring basis for access to
its catalog of books. You can read as many
books as you like on your Kindle for a fixed
monthly price. You don’t own the books,
and when you cancel your subscription,
you can no longer access any of the books.
Each model has its benefits. You can
pass your books down to your children.
You can lend them to friends. With the Kin-
dle Unlimited subscription, you can’t do
these things—but you can read three, five,
even ten books in a month, for the price of
a single book.
In several markets, including the San
Francisco Bay Area and New York City, in-
demand, high-priced medical doctors have
begun offering a membership-based “con-
cierge” service, including home visits and ac-
cess to the physician’s mobile number for a
subscription fee.
There are other types of SBBs as well—
you can subscribe to Microsoft Office and
access the latest version of its software for
a fixed annual fee, and get all kinds of ad-
ditional benefits, such as storage and sup-
port, for less than it would cost to buy the
software outright and load it onto your
2 © Business Expert Press 978-1-94944-387-5 (2019)
www.businessexpertpress.com
computer. But when you own the software,
you can use it forever, with no additional
fees, while the subscription requires regu-
lar payments, forever.
More recently, entrepreneurs have de-
veloped all kinds of new SBBs. I own my
Peloton exercise bike, but I pay a monthly
fee to access live-streamed spin classes.
Subscribers to Blue Apron get premeasured
ingredients and recipes delivered to their
home every week. Nike’s EasyKicks of-
fers a subscription to kids’ shoes for busy
parents.
Companies are drawn to the promise
of subscription prices, but need to recog-
nize that this change in pricing actually
requires a new business model. Most com-
panies are product centric. This means that
the company defines itself by the products
it creates—a car company, or a software
company for example. In a subscription
model, subscribers have greater flexibility
to cancel, so the product needs to continu-
ally evolve to stay relevant to the custom-
ers. Subscription companies need to focus
on maintaining that long-term relationship
with the customer—otherwise, the cus-
tomer will cancel.
Some companies are focused on short-
term revenue, hitting their quarterly num-
bers. In a transactional, product-centric
business, this can be effective—for ­example
by adding fees to the product. However,
subscribers expect pricing to remain con-
sistent and will be angry (and might can-
cel) if fees are added. Many companies
sacrifice long-term subscriber relationships
for short-term revenue and as a result their
SBB fails.
If you asked me why most SBBs fail, in
a nutshell, I’d say it’s because they don’t
understand that for this type of pricing
to work, they need to establish a trusted,
long-term relationship with the subscriber.
The customer needs to be treated like a
member, like someone who will be inter-
acting with the company for the long term.
The company needs to join the Member-
ship Economy.
Expert Insights
 Growth Strategies for Subscription-Based Businesses
In fact, there is actually an interesting
opportunity for trusted advisers such as at-
torneys, financial planners, and certified
public accountants to build membership
models, or a new kind of retainer that fea-
tures a fixed monthly fee in exchange for
unlimited advice within a defined scope.
Since the trust is already there, subscrip-
tions could work well and give clients the
benefit of not having the meter running.
Increased pressure on these professional
services providers through Artificial Intelli-
gence applications makes business models
that emphasize the personal relationship
even more attractive.
The Membership Economy is a massive
transformation that is changing the way
companies treat the people they service. It
has been propelled by two things:
1. Technology is extending the infrastruc-
ture that enables trusted relationships.
The latest developments include secure
auto-payments, online community, de-
clining costs of storage, user-generated
content, and always-on devices. Each
of these advances makes it easier and
cheaper for organizations to build con-
nections with the people they serve.
2. An influx of venture capital makes it
possible for new companies to invest
in establishing trusted relationships be-
fore they have to demonstrate a return
on that investment. Many companies
have up to 7 years or more to monetize
the relationships they are building with
customers who are getting real, ongo-
ing value without spending a penny.
Historically, companies needed to pay
for their expenses with their own cash
flow or loans requiring repayment on a
regular schedule and with interest. This
new access to capital provides tremen-
dous freedom to entrepreneurs to focus
on the long term.
Obviously, SBBs generate recurring rev-
enue, and subscription businesses funda-
mentally change the relationship between
© Business Expert Press 978-1-94944-387-5 (2019)
www.businessexpertpress.com
the company and the customer (the sub-
scriber). The benefits of subscription can
be even greater.
Subscription models drive customer hab-
its that engender loyalty and generates be-
havioral data that can be used to enhance
product offerings. For example, in October
2018, ridesharing service Lyft announced
a subscription model through which riders
could get 30 rides per month for $300, an
­offer many believe would cause urban work-
ers to stop driving to work and start depend-
ing on rides. The company will be able to
rapidly test this hypothesis because it tracks
every ride by member and will be able to see
whether riders are making the same journey
back and forth on a regular basis.
Even if the initial transaction is smaller, in
the long term, subscription businesses are
much more valuable than their transaction-
ally oriented counterparts. Just look at the
valuations of SaaS companies in comparison
with software companies using licensing
models. And in a different vein, consider
amusement parks that are charging only
about twice the cost of a single day pass for
an annual membership, or carwashes charg-
ing subscribers two to three times the cost of
a car wash for unlimited washes.
Eventually, Silicon Valley and Wall
Street began to take notice, and businesses
with subscription pricing started earning
much higher valuations than companies
with anonymous transactions. For every
Blockbuster, there seemed to be a N ­ etflix,
and traditional industries of all types be-
gan ­ experimenting with subscriptions.
[Sidebar listing industries implementing
subscriptions: ­ Grocery (Plated), Air travel
(SurfAir), Music (Spotify), Software (Sales-
force), C­ inema (AMC), Fitness equipment
(Peloton), Vet Medicine (Fuzzy), A ­ pparel
(LeTote), Travel (Inspirato)].
But subscription is just a pricing deci-
sion, and true success in any membership-
oriented business requires a new corporate
mindset. Changes need to happen across
the entire organization in order to grow the
subscription business. Sales organizations
Expert Insights
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