Dealing with the rise of subscription fatigue

One of the biggest challenges in a CFO’s toolbox is visibility into everything going on inside the organization. CFO Matt Sudran helps Hubble customers achieve better visibility in a more literal sense: The company sells direct-to-consumer eye-care, glasses, and contacts.

Operating via a subscription business model also gives Hubble’s C-suite better vision on another level: “greater visibility into expected purchase timing,” Sudran said, “enabl[ing] more informed decisions about inventory, fulfillment capacity, marketing investment, and cash management.”

Sour on subs. But what about the customer? Americans are feeling monthly subscription fatigue lately, as inflation forces them to cut back on unnecessary spending.

Sudran thinks Hubble stands out among other subscription-model companies because of how it fits into customers’ daily lives and needs—but it’s still something Hubble executives regularly talk about, he told CFO Brew.

“We are discussing internally the subscription versus one-time purchase option,” Sudran said. “Right now, the economy—everyone’s squeezed, and we’re even [seeing] people are buying everyday items, like groceries, on [buy-now pay-later services] Klarna or Affirm.”

“With the subscription model of not paying that $700 for an annual supply of contact lenses up front, we essentially are that model for those consumers that don’t want to pay that up-front cost, but also want to try it for a 10 to 30 day [trial] period,” Sudran said. “And we have an easy cancel flow if it doesn’t fit to that consumer’s liking.”

“Customers who reach their third order [with Hubble] tend to remain with us longer,” Sudran told us in an email, which “makes the first 90 days” of a customer’s experience “a critical financial and operational priority.”

Retention is paramount. Subscription businesses need to pay particular attention to customer retention and engagement, and trust between the company and customer.

At Hubble, “forecasting begins with the existing customer base: “expected reorder timing, anticipated spending, and the likelihood of continued engagement,” Sudran said. “We then incorporate[s] new customer acquisition[s] and assumptions around cancellations, skipped orders, and payment failures…The subscription model provides greater visibility into future revenue, but the reliability of that forecast depends on the accuracy of our retention assumptions.”

Hubble does “have a one-time purchase site,” Sudran said, “if consumers don’t want to be on a subscription.” But “that’s not our strategy at the moment.” He said he’s “modeled out every type of opportunity,” including “frames as a subscription model…one-time purchases…having contact lenses being shipped every 90 days, a 90-day supply.”

“But I think the consumers have spoken, our specific consumers have spoken, that 30 days of contact lenses and that price point is also what a consumer is willing to pay,” he said.