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Why Do Subscription Services Fail?

Updated: Jan 17

Launching a subscription service requires much more than just a good idea. You need to think about the value proposition, customer segments, price points and models, etc.

Let's take a look at why General Motors (GM) suspended operations of its Book car-ownership subscription service.
General Motors Headquarters
General Motors Headquarters

Why Did GM Stop the Subscription Service?

According to The Wall Street Journal, the service which the company introduced less than a year ago, will be resumed — with certain modifications — at some unspecified time in the future.

Apparently, Book was not as popular as hoped. Also, it was more expensive to run than GM had expected. GM has, therefore, done what most firms would do in a similar situation and focused on its core business: producing cars.

Based on personal experience with consumer product subscriptions, it is clear that anything totally new requires constant iterations and refinements before a novel business model can be released into a new environment.

What to Consider When Launching a Subscription Service?

There are some fundamentals to think about when launching a subscription service.

  • What is an acceptable price point for a value provided within a subscription lease service?

  • Does this value proposition solve a particular problem? If so, which?

  • Which customer segment is the offering appealing to?

  • Which pricing model looks fair and transparent to the customer?

  • Would this value proposition for the offered price be so good that it would knock available alternatives out of the park for this customer segment?

As no one knows the true answers for these questions, the players will continue experimenting until someone succeeds. Only after finding a suitably attractive price point will some revisit the cost side in the hope of finding a balance there.


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