Subscription Business Best Practices from the Chinese Experience

It seems like the Chinese have figured out the perfect business hybrid: one that taps into cultural sensibilities to encourage more customers to pay directly for the content they want. Americans have yet to find this balance due to the vast differences in consumer behavior between the two markets. Cookie-cutter solutions are therefore untenable, not to mention non-optimal.

However, there are some lessons that American businesses can learn from their Chinese counterparts. Here are a few of them.

Monetize What You’re Good At

The Dark Knight’s Joker put it in perhaps the most black-and-white way possible: If you’re good at something, never do it for free. Of course, this statement has a lot of wiggle room and shouldn’t be taken literally. However, one thing that holds true is that if you have a specific skill set, you can find opportunities to monetize it.

An app in China called De Dao (meaning “I Get”) was launched only last year, and yet it already has more than 7 million users. Its business model? People looking for advice or tips regarding a wide range of topics can subscribe to relevant channels and pay an equivalent of around $30 per channel. De Dao’s extensive channel list range from playing an instrument to investing in the stock market, meaning that even a very niche field or interest can easily generate hundreds of thousands of dollars annually with a modest 10,000 subscribers.

This creates loyalty within the subscriber base as long as the channel continues to provide quality content, which makes recurring billing and payments a more reliable source of income over advertising. More importantly, subscribing to just the channels you prefer means that consumers can easily (and readily) customize the application’s interface through content curation, resulting in a more pleasant and convenient user experience.

Freemium Is the Way

The Chinese are among the pioneers of the freemium business model, with the rise of multiplayer online games occurring in the country in recent years. This model eventually found wider adoption among major video game creators in an effort to combat piracy. Today, Chinese consumers have openly embraced freemium as a norm, even beyond the video game industry.

Freemium has also become a popular business structure for video games and software (think Dropbox, MailChimp, and a host of anti-virus programs) in the United States, although most content-based businesses can also use this model to encourage subscriptions. The trick is to provide a great product and offer it for free, and then develop even greater paid services.

You also have to find the balance between teasing the audience just enough to get them hooked, and convincing them to pay a fee to get more of what they’ve already grown to love. Competitive pricing is also important, as some freemium services and products fail in this department because they either provide too low a cost, leading to losses, or too high a price, leading to lower overall sales.

The Power of Mobile

Perhaps due to an established credit card system, mobile payments hasn’t been adopted in the United States as quickly and as widely as it had been (and continues to be) in China, where more than 695 million people access the Internet through their mobile phones. This explains the popularity of services like Alipay and WeChat, which allow people to connect their bank accounts to their mobile phones, and why even the smallest convenience store chains have already enabled mobile payment for years.

However, more and more retailers in the United States are already planning to adopt at least one method of mobile payments in the next 12 months. Coupled with the fact that mobile phone penetration is expected to reach up to 82.1% by 2018, it’s wise to consider incorporating mobile payments to tap into this huge market trend.

The Chinese have long been accused of being copycats, but it can’t be denied that they are also savvy businessmen. American companies will do well to pick up tidbits of business wisdom and see how these practices can be customized to fit the US market.