Five Common B2C Monetization Mistakes and How to Avoid Them

Five Common B2C Monetization Mistakes and How to Avoid Them

By David Warren, Sr. Director, Subscribed Institute, and Michael Mansard, EMEA Chair, Subscribed Institute

Recurring revenue pricing strategies often feel more like an art than a science. While innovative approaches can yield significant returns in the form of new customers and increased revenue, they can also lead to major setbacks when companies fail to understand or consider the needs of their target audience. Here are six notable missteps in the world of recurring revenue, and what lessons you should take from each of them. 

 

1. Tidal: A Pricey Gamble in Music Streaming

When Tidal launched in 2014, it aimed to differentiate itself with high-fidelity sound, exclusive content, and better financial support for artists, justifying a premium price of $19.99 per month. However, this niche market of audiophiles wasn’t large enough to sustain this price point, especially when competitors like Spotify and Apple Music offered similar services at half the cost. In 2021, Square (now Block) acquired a majority stake in Tidal. By Spring 2024, Tidal consolidated its pricing tiers into a single $10.99 per month plan, aligning more closely with industry standards but at a lower margin due to its generous royalty structure. 

Recommendation: Don’t launch at scale until you understand your total addressable market and iterate on pricing until you’re clear. Run tests at a small scale to understand what features are most important and drive premium.

 

2. United Airlines: Unlimited Travel, Limited Interest

In 2021, United Airlines introduced an unlimited travel subscription priced at approximately $5,000 per year, targeting frequent travelers. While there was a spike in interest at the time of the announcement, especially from their loyal, road warrior business traveler segment, demand dropped due to usability issues and the inability to accommodate schedules. Casual travelers who flew a few times a year couldn’t justify the price and stayed away. 

Recommendation: Identify target customer segments and test for winning value propositions for each of them.. 

 

3. Audi: Built-In Boo-boo (and BMW too, oh my).

Audi faced significant backlash in 2022 for charging subscriptions for built-in features like adaptive cruise control. Customers were outraged at the notion of paying extra for capabilities that they are accustomed to having as part of the purchase price. This strategy caused frustration for Audi’s discerning customer base and damaged the brand’s reputation. By 2024, Audi made adaptive cruise control standard for all its SUV models, acknowledging the misstep. Meanwhile, just a short 130 km/h drive down the Autobahn, BMW attempted to introduce a subscription model for features such as heated seats in 2022, charging around $18 per month in some markets. Consumer backlash was just as swift and intense, as was the negative press coverage. Like Audi, BMW ended up getting rid of the add-on charge and re-focused its subscription strategy on software-enabled services instead.

Recommendation: Don’t charge add-on fees for features that have historically been included free unless they are delivering new, superior, and/or differentiated benefits.

 

4. MoviePass: A Script for Financial Disaster

Perhaps the most infamous of all recurring revenue failures, MoviePass offered a subscription for $9.95 a month in 2017 that allowed customers to see one movie per day. This model was unsustainable from the start. MoviePass quickly burned through its cash reserves and was forced to impose restrictions, raise prices, and limit the movies customers could see. These desperate measures were insufficient to save the company, which ultimately shut down on September 14, 2019. 

Recommendation: Be careful not to offer too much value as a means to convert new customers without piloting the offer to understand how much customers are going to consume and then use the consumption data to build tiers that can be priced and marketed to low, medium, and high usage customers.   

 

5. Blue Apron: Mind the CAC

Blue Apron was at one time a rising star in the meal kit delivery space with its high-quality items and strong brand awareness. But increasing awareness came at an increasing cost. At their peak, customer acquisition costs (CAC) were around $100, much of which was driven by free trials. And while there was a sizeable segment of consumers who were profitable and became subscribers, the customer lifetime value (CLV) for that group averaged less than $150; a CLV:CAC ratio of 1.5:1 (anything below 3:1 is considered suboptimal). Worse, the least loyal segment of customers who took advantage of the free trial and then bought little to nothing else had a CLV of around -$80.  In short, the company was giving away free food. 

Recommendation: Free trials are a great way to get your product in the hands (and bellies) of your customers, but can spell trouble if they extend your customer acquisition cost payback period to beyond 12 months (high for a B2C), especially when deploying a no-contract, evergreen model. If that’s the case consider offering an affordable paid trial in exchange for a minimum commitment. 

 

Conclusion

These examples underscore the importance of “thinking backwards” and focus on the customer first. While the allure of steady, predictable income is strong, businesses must balance customer value with financial sustainability and avoid the pitfalls of misjudging market demand and customer expectations. To prevent becoming a member of future lists like this, use this list of questions to evaluate your current recurring revenue strategy:

  • Market Understanding: Do you understand who your customers are and what they are willing to pay a premium for?
  • Pricing Models: Is your pricing sustainable and reflective of the value provided based on customer expectations and industry standards?
  • Feature Monetization: Are the add-on features you charge for unique or deliver above and beyond what else is in the market?
  • Value and Revenue Balance: Are you offering significant value without compromising financial sustainability?
  • Customer Acquisition and Retention: Do you have a healthy CAC to CLV ratio (aiming for at least 3:1)?

 

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