Over the last several years, the technology industry has continued to double down on subscription models. And now, Nike seems to be learning a thing or two.
Starting this week, Nike will begin offering a subscription service for kids who want to stay stylish throughout the year. The service will offer three pricing tiers of $20, $30, and $50 per month. The cheapest option in the Nike Adventure Club will let kids get new sneakers every three months. The middle tier will allow for sneaker upgrades every two months and the most expensive option will allow for upgrades every month.
If the program, which is only available to children between the ages of two and 10, sounds familiar, it’s because the technology industry has turned subscription models into an exceedingly profitable business model.
Nowadays, it’s nearly impossible to find a prominent technology company that isn’t charging subscription-based access to something. Amazon does it with Prime, Apple does it with iCloud and Apple Music, Google does it with G Suite, and Netflix gives you access to its entertainment library for a monthly fee.
The reason subscriptions have become so popular is consumers and businesses find it, in some ways, more appealing. Instead of plunking down hundreds or thousands of dollars on a new solution and with a limited budget, companies are instead offering nominal monthly fees. Consumers and businesses then pay those fees each month, feeling as though the $10-a-month charge for Apple Music, for instance, is a small price to pay.
Companies, meanwhile, love the subscription models. Sure, they’re not getting so much upfront, but they’re getting a little bit each month. And as long as consumers or businesses stick with them, they can make far more over the years than they might in a traditional business model.
If we’re to assume that kids get a new pair of sneakers every year or every other year to accommodate their growth, even for an expensive $100 pair of sneakers, we can safely assume that they’ll pay no more than $200 of a two-year period for new sneakers.
With the Nike Adventure Club, however, even the cheapest option will cost consumers $240 per year. At its most expensive, it’ll cost $600 per year.
Looking solely at the numbers, it wouldn’t make much sense at all for folks to sign on to Nike Adventure Club. But consider that kids could get a new pair of sneakers each month, and Nike ostensibly believes that at least some folks might go for it.
That’s perhaps a lesson any business owner can learn. The fact is, consumers and businesses have become conditioned to pay monthly for the services or products they want. They do it with everything from CRM platforms to smartphones. And they seemingly do it without caring too much how it’ll affect their bottom lines.
Is there, then, an opportunity for you, the business owner, to do the same? Perhaps it’s time to consider it. Whether you provide a software solution or sell through the retail channel, there are clearly ways for subscriptions to work. And although you might take a short-term revenue hit by changing your business model, over the long term, there’s clear value in sticking to subscriptions.
Source: Nike Has Taken a Page Out of the Tech Industry’s Playbook. Here’s Why You Should, Too | Inc.com
