Pilot testing is an important step in any business innovation as it allows you to test your approach with a small number of participants before conducting your main study. This can help you to identify any potential problems with your research design or methodology, and make sure that your main business project is as smooth and successful as possible. Although it may take some extra time, pilot testing your new business model is always time well spent.
An initial small-scale business implement, which is done to test a new project idea for potential success, a pilot project allows an organization to manage the risks of a new concept and explore any weaknesses before making significant investments.
For example, imagine your company is considering using a new software package. The standard implementation approach for this software would be tested in a pilot project first, in order to make sure it is viable and worth investing in for the company.
Pilot projects are important because they can save an organization a lot of time, money, and resources if the project idea does not turn out to be successful. By doing a small-scale test first, organizations can avoid making large investments in something that may not work out in the end.
Setting a goal is crucial for launching a pilot subscription business model because it defines the scope of the pilot. How will you determine if the pilot was successful or not?
What will you do after you’ve analysed the success or failure of the pilot? These are some of the questions that can be answered if you have a goal in mind for your subscription pilot project.
Common subscription pilot goals
Here are some of the most common goals we’ve come across when talking to and working with other customers.
To check if there is demand for your product subscription.
Will your product be accepted by the customer as a subscription product? This is probably the first question that pops up when thinking about launching a product subscription business model. 10 years ago this would have been a question that didn't have a footprint on the internet but now there are so many products out there that none of us would have even thought about renting or subscribing. One of the best ways to check demand for a product is to check if there are any existing competitors in the market. If there are then it mostly comes down to awareness and education activities about your product.
Believe us when we tell you that subscriptions exist for all kinds of products. Bikes, cars, scooters, electronics, consumer goods, fashion goods, sporting equipment, construction equipment, furniture etc are some of the most common product subscription models. If you have a similar product that you’d like to test for a subscription business model then take it from us, there's plenty of demand in this space. If your product isn't one of the products mentioned above, then send us an email (firstname.lastname@example.org) and we’ll take it from there.
Ask yourself: Are there existing subscription business models with the same product?
To test the demand for a product subscription in a particular market.
Some markets and countries are hotter than others when it comes to product subscriptions. The concept may be very famous in one part of the world and completely absurd in another. The Netherlands is home to many successful subscription-based startups. Subscriptions are also very famous in America and the UK is also catching up to the access-over-ownership trend. Entering new markets has its own advantages and risks. Companies benefit from a first-mover advantage if they decide to take the risk. Therefore testing out a new market is one of the go-to goals for a pilot.
Company with a similar goal: TIER MOBILITY
Do you know the company TIER? Of course, you do. TIER operates in the micro-mobility space. They are one of the best examples of what it means to build a business model around access to a service via a product. Besides their floating fleet model, they now have launched a monthly subscription model for their second-live e-scooter in locations across Europe.
TIER's goal with its pilot is to test new markets and see if a subscription model has any demand in the target market.
To test if subscriptions can contribute towards building a stable revenue stream.
Subscriptions are the best way to build stable revenue streams. Despite all the discussion about customer churn, subscriptions are and will remain a way to have better control over the company’s finances.
Company with a similar goal: TIER MOBILITY
TIER decided to launch the monthly subscription model because their investors wanted a more streamlined, stable and predictable revenue stream.
To test if sustainability is a selling point of a product subscription model and if it’s attractive for the customer.
At its core, product subscription business models exist to empower the circular economy. The promise of the circular economy is to contribute towards waste reduction by keeping products in use and extending the product lifecycle. Besides being an affordable access point and lowering the financial burden for the user, product subscription business models also promote sustainability as one of the attractive selling points. Pricing of some products can be more in comparison and it’s important to know if customers are willing to take on the financial burden (if at all) with the promise of sustainability.
Test yourself: are your potential customers willing to pay (sometimes even more than ownership) for access to a product that promises sustainability?
Company with a similar goal: StrollMe
Baby good company, Strollme operates a subscription model with sustainability as its core. Their baby strollers and other baby goods are built on a promise of sustainability. Even though they do not manufacture their own products rather source them from another manufacturer, what they try to achieve is to make certain that the majority of the resources that go into building the product use sustainable. They launched their subscription model in 2020 and have been seeing a constant increase in demand growing at 70% month over month.
Strollme tested if customers are willing to pay more with the promise of sustainability and a better future for their kids. The results are DEFINITELY positive.
To test if more players can enter a competitive market.
Believe it or not, like mobility, baby goods is another competitive space for product subscriptions. There are already some subscription businesses in this space and more are entering as soon as they can wrap their head around the concept. When it comes to the subscription economy, we are definitely not at a point where market entry is restricted but early movers have a clear competitive advantage.
The market for a product may already have a few competitors but that shouldn't be a reason to not enter the market. Entering a competitive market has its advantages and risks. The advantage being plenty of demand and familiarity with a concept and/or product and the risk being finding ways to milk more from the cow.
Company with a similar goal: Bugaboo
Baby goods company Bugaboo has already been in the market for quite some time now BUT NOT in the product subscription space. As they saw more and more businesses entering the market, they decided to test the market for baby goods on a subscription basis on their own.
Baby good manufacturer Bugaboo entered the subscription space to see if they can enter a competitive market and gain some share.
To experiment with and try out a business model.
What sets one product subscription business apart from another, besides price, is a unique business model. Different subscription businesses offer different things to their potential customers. Some companies focus on the service and product offering more than the product itself. It’s not so much about the product itself as it is about the whole service offering. The product itself may not be very attractive but the benefit, service and offering combined make it attractive for the customer. Even though your product may not be unique, the subscription can be.
What’s new about car subscriptions? Nothing. But that doesn't stop big car manufacturer giants from entering the market with their own subscription offering.
Company with a similar goal: Volkswagen
Volkswagen aims to transform from a car manufacturer to a mobility service provider and predicts to earn 20% of its revenue from subscriptions and other mobility offerings.
To test if you can monetise additional service and maintenance to a product by offering a monthly subscription.
A product category quite well suited for monthly subscriptions are medium to high service-based products. These are also often high value, high service-based products used directly by the customer or by other businesses. Products that are service intense can be transformed into a subscription offering. This is often done by companies for various reasons such as, binding the customer to the company, analysing the lifecycle and performance of their product in the market/use and to control the service aspect tied to the product.
Most companies operate such a subscription-based business model to avoid any breakage of the product by performing regular inspections and offering regular maintenance checks to the customer. This of course is appealing to the customer because for the customer, such an offer means better value for their money and a hassle-free approach to usage.
Company with a similar goal: Miele
An example of a company that has a similar approach is Miele. Miele is a German consumer goods company that has a service-based subscription business offering. Miele offers washing machines and other such service-based products on a monthly subscription basis. They can monetise their products on a monthly subscription plan by adding service, maintenance and installation as part of the subscription package.