The trend away from retail sales towards Netflix-style subscriptions is one area where those nonprofit leaders who rush to copy their for-profit brethren could be burned…
Shopping is out, subscribing is in. So says a flurry of articles this month from Fast Company to the Huffington Post. Consumers are shifting in droves from purchasing products to becoming members who partake of goods and services paid through an automatic monthly charge. Netflix did it for movies (when’s the last time you bought a DVD?) and ZipCar has even made inroads in the automobile sector. Why pay $20 for a movie you’ll watch three times, or purchase a car in an urban environment where you’ll only use it twice a month anyway?
And if Americans can give up the rite of passage of owning a car in order to save a buck, there seems to be no end to the possibilities. Want a new razor blade to arrive on your door step right when you need it? Join the Dollar Shave Club. What about all those diapers and wipes and baby supplies that seem to run out at the worst time? Schedule deliveries through Amazon Mom for steep discounts and free, timely shipping.
In the PR efforts of the companies adopting this model, all this means savings of time and money for busy consumers. And certainly there’s an appeal to subscriptions for certain products and services. Who would go to a gym, for example, that charged by the minute rather than a flat monthly fee? In this case the fact that your consumption doesn’t line up perfectly with your cost is actually good, because you want to feel encouraged to spend more time on the treadmill, not less. And I have to admit that I loved the novelty of receiving Omaha Steaks on my doorstep as a Christmas gift this year- wouldn’t it be cool if I could subscribe to a meat delivery service and get that frozen box of goodies every month?
But as Kyle Hutzler points out in his HuffPo article, there’s a dark side lurking beneath these models. One of the reasons companies are so fixated on subscriptions is that people tend to get lazy and continue paying for services they don’t really use or need. Psychologically, there’s a greater distance for subscribers between the use of the goods or services and the charge, which might be withdrawn from your checking account without grabbing your attention. And we all know it’s a lot easier to stop yourself from heading to the mall to buy the latest Hunger Games flick than it is to unsubscribe entirely from Netflix or Hulu. Brian Bell of Zuora spins this as good news, since it allows for very stable “forward-looking annual recurring revenue” that completely upends the traditional financial model for businesses. But for the average consumer that’s just business speak for more money disappearing from your pocket and heading to a corporation.
Like most business trends, the rise of subscriptions will certainly affect the non-profit sector going forward. As more and more of our expenses are automatically paid in monthly installments, there will be a temptation for non-profit executives to follow suit and redesign donor outreach and communication efforts to favor subscription-style memberships.
Color me skeptical. “Nonprofits should act more like a business” articles are a dime a dozen these days, when most of the sector speaks unironically of a philanthropist’s “investment” and “return” on charitable giving. But the trend away from retail sales towards subscriptions is one area where those nonprofit leaders who rush to copy their for-profit brethren could be burned.
Good development programs integrate their donors into their organizations, making them partners in the mission of the organization instead of glorified philanthropic ATMs whose significance ends once they cut a check. The steady, passive revenue stream promised by the subscription economy may be tempting on the balance sheet, but the tenuous connections it forms are antithetical to the type of relationships thoughtful donors and nonprofits should seek. Nonprofits should be forming mutual partnerships based on shared convictions and activities, not merely arranging monetary transactions. Over time such relationships will better serve the charitable ends of both parties in both financial and social terms. And as far as business analogies go, a good nonprofit’s outreach efforts will always resemble the personal service at a local farmer’s market much more than signing up for a Netflix account.