Nowadays it is possible to get subscriptions on almost everything, from bikes, and underwear to razor blades. The underlying reasons of those business models are not always customer-friendly. However, when executed right there can be many benefits for the customer as well as the company.
Crownstone is a smart home concept that starts truly working nice as soon as you get multiple of those devices in a household. As a manufacturer it’s easy to compare with competing technology like KNX which easily costs 5-10k and think that slashing the price ten times will drive customers in droves. However, to be realistic, smart home is so new that the majority of people does not want to spend even a couple of hundreds. What to do?
Low monthly price
We’re offering a subscription of € 15 per month for 10 of the Crownstone devices. To buy this you would spend € 450. To understand how cheap this is: a warranty period is 2 years. If you divide € 450 over 2*12 months is € 18.75, more than € 15! For this price you don’t have to worry. Everything will be maintained and replaced by Crownstone when need arises. The price itself, € 15 per month, can be compared to a music or movie service subscription. A smartphone subscription (which includes hardware) is normally more expensive.
Our business can run much more sustainable using a subscription model. Of course, there are very few companies that purposely plan for obsolescence. However, if warranty is 2 years, there’s the wrong incentive. A subscription service means that we have to design the products such that have very long lifetimes. Moreover, every service request costs money. Hence, the quality of the product must be such that maintenance costs are minimal. This all means a much better user experience.
If a company has steady income through subscriptions, it can focus on making the software that comes with the harware better and better. The subscriptions pay for optimizing the user experience and building new features. If the hardware is a one-time sales event, there is no need to have a flawless user experience! Just convince the user to buy and be out of there! Subscriptions allow Crownstone to have full-time software engineers on-board that create software for hardware that is already sold in stores. This is not only true for new features, but also for security updates.
If you buy the products of a company, no one wants to see it go out of business. Companies that have subscription models have very predictable cashflows. Apart from that, the performance indicators are very transparent. That means that companies can more easily raise funds to grow internationally. If you fear if a company still exists in ten years from now, it’s good to know its business model is robust.
If a company sells individual products like the Crownstones in packet sizes of a single unit or a couple of units, it is impossible to also include additional services. For Crownstone a very welcome service is to do the installation for people. By providing a subscription service with at least 10 Crownstones, we can much easier provide such a service. We are not intending to earn money on this service. Currently, we estimate the costs to be around € 100 per household.
There’s a great possibility to reward people if we use a subscription model. We can provide discounts when people refer their friends. This only works if people already use your service. In contrast with presents at the start of a contract, this values long-term customers and rewards loyalty. That is regretfully very rare in a business model. Suprisingly, because it is so much nicer to offer discounts to loyal users than to pay chunks of money to advertisements on social networks and search sites!
The difficulty with subscriptions are often that other companies use very bad terms of services. It is impossible to get rid of the service. At Crownstone we are very transparent. We offer very straightforward one year subscriptions and we ask as little money for installation and removal as possible. After this year, you can cancel any time. We prefer happy customers above customers who actually don’t benefit from their smart home like they thought they would!
This blog post is obviously written from the viewpoint of Crownstone and you might still want to buy the products rather than going for a subscription. We are definitely not saying that subscriptions are the only way and we happily support direct sales. However, hopefully this made you think again about what subscriptions mean nowadays and who knows, check out ours! We look forward to support you in your smart home!
26 August 2020