May 25, 2022

StrategisChhr

Skillful Business Crafters

Taco Bell Just Announced a Really Strange Idea. Should Your Business Copy It? (Answer These 5 Questions to Decide)

Let’s talk about the weird new offer that Taco Bell just announced, and how it might inspire you to do something similarly strange (but smart) at your business.

We’re talking here about the $10 monthly subscription service that gets subscribers one taco every day for 30 days.

The whole thing sounded like a joke to me, at first. Then, the wheels turned, and I realized it’s kind of a brilliant experiment.

You’ve probably heard the phrase “software as a service,” or SaaS, about a million times over the last decade or so. I guess we can call this TaaS, or “tacos as a service.”

So, if you’re not doing it already, should you think about offering a subscription-based model for whatever it is you create and sell?

  • For example, computer hardware upgrades as a subscription-based service.
  • Or else, ice cream or flowers as a subscription-based service.
  • Or else, oil changes or haircuts or tax litigation or whatever else as a subscription-based service.

Whatever it is that your business does–only, as a subscription-based service.

I’m aware, of course, that a lot of industries already have a subscription model or something like it. But we’re talking here about the things we don’t normally think of.

Like tacos. Or almost any fast food, for that matter.

Panera has a subscription service that lets customers pay $8.99 a month for unlimited coffee or tea. Sweetgreen has a new $10 montly discount program. But, it’s still a rarity for the industry.

Taco Bell says it previously experimented with this model last year in Tucson. 

The company didn’t say how many customers actually enrolled, but they said 20 percent were new to the Taco Bell rewards program, and 20 percent of those who enrolled renewed for a second month.

Apparently, those results were good enough to convince them to take the whole thing national. 

And while obviously, we can’t say for sure whether this will prove to be a success, I think we can break down several factors that make the model a no-brainer for Taco Bell to try. If you can answer “yes” these five questions, than maybe it makes sense for you to think about it in your business.

Question #1: Would you be you a first-mover?

Fast food might be fertile ground just because most competitors aren’t doing this yet. The first-mover with a subscription model has at least two big advantages: 

  • the total addressable market arguably shrinks with each new player, since most customers won’t subscribe to multiple competitors, and 
  • once you have a customer, inertia will be a factor in preventing them from switching to somebody else.

Question #2: Can you upsell?

Industry reviews of Taco Bell’s program point out that while $10 a month works out to just 30 cents or so per taco, most people don’t eat just one taco.

While they’re visiting, the likelihood is high that they’ll buy more tacos, or other side items or drinks.

So, do the math. Can you use a subscription to provide legitimate value, but find ways to attract other revenue, too?

Question #3: Does the margin work?

The Taco Lover’s Pass, as this program is called, lets subscribers pick from among seven varieties. The lowest-priced, according to TacoBell.com would be the $1.49 soft taco or crunchy taco (actually, the black bean soft taco is $1.39); on the high end, the Doritos Locos Tacos Supreme goes for $2.69.

Again: It’s all about math. I don’t know what it costs to make one taco, but ask yourself: Can make a subscription model work, without cannibalizing other sales, while offsetting your cost of goods sold, but while also adding in any other longer-term benefits you can get out of having customer subscriptions.

Question #4: Are there other bonuses to consider?

Speaking of longer-term benefits, Taco Bell gets at least two that I can think of immediately, beyond simply selling tacos at a discount:

  • First, there’s breakage — whatever percentage of subscribers simply sign up and forget. This includes the significant number who probably don’t show up to get their taco every day, but also those who sign up and then completely forget they have a  subscription, and never cancel it.
  • Second, there’s the fact that in order to subscribe, you have to download the Taco Bell app and sign up for the company’s rewards program. A lot of companies pay a lot of money on average for each download, and app downloads mean you can often get a lot more customer data, too.

Question #5: Is it weird enough to matter?

I admit: I thought about this story at the start because tacos as a subscription service just seemed so weird. That doesn’t mean it’s a bad idea, but it does get attention.

In fact, you could argue persuasively that the weirder it would be for your business to try to sell itself as a service, the better — at least in terms of getting free, earned media or social media as a result.

Obviously, not every business should shoehorn itself into a subscription model. There can be drawbacks; as someone who writes a daily newsletter and has built a pretty big following, I think a lot about subscriptions and signups and the pros and cons of the model.

But, if you look back at those five questions, and find yourself answering “yes” or at least “maybe,” it’s worth at least considering. If you go ahead and do it, let me know how it works out — especially if it’s weird enough to make Question #5 a self-fulfilling prophecy.   

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.


https://www.inc.com/bill-murphy-jr/taco-bell-just-announced-a-really-strange-idea-should-your-business-copy-it-answer-these-5-questions-to-decide.html