A number of brave companies are going out on a limb and offering an all-you-can-eat (AYCE) subscription service or product. With the AYCE model, the idea is to generate high revenue by offering great value for money. These models primarily appeal to price-conscious consumers who want to get as much as possible for their money. The challenge with AYCE models is ensuring that clients leave feeling that they have had their fill, without allowing them to overuse the product and service (and thus eat away at your revenue).
Overuse can easily happen when you open the door to AYCE. Red Lobster learned this the hard way back in 2003, when its ambitious unlimited crab legs promotion led to customers who ordered 30 plates in a sitting. This astonishing rate of consumption, compounded by a rise in seafood prices, led to $3.3 million losses in one quarter and ungraceful exit of the company president.
In theory, the AYCE system works on the basis that losses created by “hungry” clients who overuse the service is made up for by more moderate clients, who use considerably less than their allocated amount. If the margins and usage assumptions have been calculated correctly, then a good profit should be guaranteed. However, when the hungry clients begin to outnumber and outpace the rest of your customer base, then the problems begin.
It is important to remember that people with bigger appetites for whatever it is you are offering are more likely to be interested in your product. But setting clear user guidelines and deal breakers can save your AYCE business from being sunk by gluttons. Still, no one likes going to an AYCE restaurant and being told that they can only visit the salad bar. The limits you set need to maintain the integrity of your AYCE proposition.
Let’s take a look at a couple sectors where AYCE models are thriving and what those companies do to maintain the delicate balance between keeping users happy, and reigned in.
Physical books take up space and are heavy, especially in bulk. There are limits to the amount of books one person can carry and store in their home. Large stockpiles generally take years to accrue. The same is not true for digital books, which are weightless and take up absolutely no room. You can literally store over a thousand books on a kindle and it still weighs less than a paperback novel. This opens the door to flagrant misuse.
Amazon´s Kindle launched unlimited monthly subscriptions for online books, magazines, comics and audio-books in July 2014 to rival existing services Scribd and Oyster. The service has been well received by users and critics alike, and has seen the initiation of an innovative new payment scheme for authors based on how much of an e-book readers actually read. With Kindle unlimited the books are readable only for the duration of the subscription and on one user account. They are no longer downloadable or shareable, as they were previously, and as soon as the user stops paying, the files become unavailable.
These limits prevent overzealous users from deciding to download every single bestseller from the past 20 years in anticipation of an upcoming beach vacation, or people who make New Year’s Resolutions to “read more” from downloading an entire library in one go, and never looking at them again.
A new startup OneDo offers users unlimited flights on airlines including American Airlines, United and Virgin America with a basic package that starts at $1500 per month, plus sign up fees. Users can reserve their flights via the OneDo app, and book flights on 32 routes in the U.S. west coast up to 7 days in advance.
The success of this proposition will depend on OneDo’s careful control of client usage. There is a high risk of people “binging” here, since flights are expensive. The worst case scenario is that clients with too much time on their hands will book flights daily and cause costs to skyrocket. American Airlines (AA) launched a similar deal back in 1981, offering unlimited lifetime first-class flights for a one-time payment of $250K. While the deal offered AA a quick means of raising funds, some clients took full advantage of the deal, with one man taking 16 round trips from the U.S to London in 25 days, which would have cost $125K at full price.
OneDo’s safety net has multiple layers. First, flights are limited to a specified geographical zone. Secondly, flights (for reasons of security) must be booked under a specific name, and third, clients can only have four open reservations at one time. More expensive add-ons allow last minute flight booking up to six hours in advance, and up to eight open reservations at one time.
Frizzy fashionistas in the city that never sleeps have received a gift from the gods with the AYCE VIVE blowout app. Once viewed as an expensive act of pure decadence reserved only for your best friend’s wedding or high school reunion, VIVE have made blowouts- having your hair washed, dried and styled by a professional- an affordable luxury for New Yorkers.
Blowouts cost an average of $40-50 per single session and VIVE offers a $99 AYCE package. Without controls in place, this could easily lead to users who get blowouts multiple times a week. Why wash your hair at home when a professional can wash, dry,and style it for you at a low net cost?
VIVE prevents this from hurting hair salons by choosing where users go for them. The company is affiliated with more than 100 salons in the NYC area, and users are assigned a salon via the app based on their requested destination. This spreads the costs and reduces the risk for each business. In addition, the guidelines are clear as to the services included: blowouts don’t include haircuts or any extra services, only washing and drying. This helps keep time requirements and costs to a minimum.
There are countless boutique fitness studios in urban areas around the country. ClassPass realized that there was a huge opportunity in giving fitness enthusiasts access to all of these studios for one, set monthly price. ClassPass offers exercisers the AYCE choice of thousands of fitness classes, including yoga, spinning, circuit training, dance, kickboxing, and crazy combinations of them all.
The plan costs between $79 and $129, depending on where you live. It is great for users, who get to keep their workout routine new and interesting without breaking the bank, as well as for studios, who often struggle to bring regular clients in the door.
While you’d think that attending workout classes might be limited by work, day-to-day commitments, and exhaustion, there are those fitness nuts out there who would attend multiple classes a day if you left them. ClassPass buttresses against this risk with its rule that you can only visit the same studio up to three times a month. Like VIVE, this prevents partner locations from getting hit too hard. And if users don’t show up or cancel within 12 hours, they have to pay a fee.
Always be prepared
When deciding whether to offer an AYCE subscription for your service, it is best to take into account the worst case scenario. Consumers are always hungry, and as the armageddon-like scenes which emerge in malls every black Friday show us, Americans are passionate about deals and savings, and will go to great lengths to take advantage of them. The benefit of this attitude is that if people think they will get great value for their money, their interest will soar. Putting in the groundwork, assessing risks, calculating gains and losses, and having a secure safety net in place are key to ensuring the AYCE model actually works for your business.
Sukey Gaven is CEO and founder of all-you-can-eat graphic design service Undullify.