Wednesday, August 15, 2018

Deeper Lessons From MoviePass -- From Tickets to Subscriptions to Relationships

Many have commented sagely on the folly of MoviePass, but, at a deeper level, it is something of a caricature of how we are just at the baby-steps stage of The Subscription Economy. It is easy to laugh at what seems to be a Wyle E. Coyote model: "we lose money on each customer, but we will make it up in volume."  Of course it is not quite that simple, the intent being to monetize consumer data to compensate, but still the value proposition seems to defy gravity. There are important lessons here, as recently noted in the Washington Post, Price Intelligently, and Harvard Business Review.

These commentaries point to many dots that we have yet to fully connect into the larger image. There are many excellent insights about what Tien Tzuo of Zuora calls "The Subscription Economy" in his recent book Subscribed, and in these recent articles. The bigger picture I see here is what I call "The Relationship Economy." Subscriptions are an important way to structure profitable customer relationships, but what matters is how a business co-creates value in its relationship with each customer. If you focus on creating and sharing value with each customer, the rest will follow. That is explored in some depth in my recent post, The Relationship Economy -- It's All About Valuing Customer Experiences.

The core lesson of co-creating value is the shift from the Goods-Dominant Logic of tickets, through the more Service-Dominant Logic of subscriptions, to a fuller understanding of that logic in the value of service relationships. As the head of Stanley Tools was reported to say long ago, "our customers don't want drills, they want holes."

Eddie Yoon's article in HBR lists five lessons that serve as nice examples of some of the dots I refer to -- which I would connect into this larger picture of value-centered relationships. My perspective on his five points:
  1. Price elasticity is powerful -- and highly variable -- "playing with it requires great skill and precision." The issues are so dynamic that an adaptive, mass-customized approach to pricing is needed to profitably serve more than narrow niches. We need to go much farther down that road.
  2. "MoviePass serves as a cautionary tale of treating consumers with a transactional mindset" and "seeking to monetize them through advertising." I believe the age of services that are predominantly advertising-supported is giving way to models that are predominantly customer-supported (even if they retain some advertising value exchange in a way that is more customer-value focused, such as with a "reverse meter").
  3. All you can eat models are economically inefficient for both customers and businesses. Highly engaged "superconsumers" should be a prime asset to a business, not a gaping liability. Pricing and value propositions must adapt to different consumer needs.
  4. The movie ticket is only one aspect of the consumer experience. The customer wants holes (a good experience), not drills (tickets). A service relationship, value co-creation perspective points to ways to get more "share of wallet" from each customer.
  5. Yes, "bullying is a bad business plan." Long term success models are win-win, not zero-sum -- for consumers and business partners/suppliers.
Changing an industry like movies with essential entrenched players (theaters and studios) wedded to rigidly antiquated models will be challenging, but even so, the ultimate direction of relationship=value-focus seems clear.

My work on FairPay points to how such a new logic can work, but there may be other paths. The future of The Relationship Economy will be more mass-customized, and more win-win, drawing on deeper customer "dialogs about value." The power of businesses and customers will be more evenly balanced, and cooperation in co-creating value over the ongoing relationship will be the key to success.

------------------------
More about FairPay

For a full introduction to FairPay see the Overview and the sidebar on How FairPay Works (just to the right, if reading this at FairPayZone.com). There is also a guide to More Details (including links to a video). 

My article in the Journal of Revenue and Pricing Management, "A Novel Architecture to Monetize Digital Offerings" also provides an overview of FairPay (summarized more briefly in the ESADE Knowledge article "Three building blocks to monetize a digital business," and previously in Harvard Business Review, "When Selling Digital Content, Let the Customer Set the Price.").

Even better, read my highly praised book: FairPay: Adaptively Win-Win Customer Relationships.

(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)

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