Is your product Sacrificing Growth for Short-Term Gains?

In the race to retain customers and generate steady revenue, many companies choose to limit their best products and services to subscribers. At first glance, this strategy seems like a no-brainer — after all, who wouldn’t want a loyal customer base that pays month after month? But is this really the best approach in the long run, or could it be a trap that stifles growth?

The Allure of Exclusivity

Exclusivity can create a strong allure. Consider Apple, a brand synonymous with premium products and a carefully crafted image. In its early days, Apple limited the availability of its software to its own devices, creating a walled garden that ensured only Mac users could experience the full suite of Apple’s offerings. This exclusivity helped solidify Apple’s brand, but it also limited its market. It wasn’t until 2003, when iTunes was made available on Windows, that Apple’s user base exploded — resulting in over 10 million iPods sold within a year, a 300% increase from the previous year.

Superhuman, an email client designed for speed and efficiency, built its brand around exclusivity. The platform launched with a waitlist and an interview process to select users who would benefit the most from its features. This approach not only created a sense of exclusivity but also allowed Superhuman to refine its product based on feedback from a highly engaged user base. The company now has tens of thousands of users, many of whom are willing to pay $30 per month for the service.

Slack, the popular team collaboration tool, initially launched with an invitation-only beta. This created a sense of exclusivity and demand among tech companies and teams eager to try out the platform. By the time Slack fully launched, it already had a strong, engaged user base. Today, Slack is one of the most widely used collaboration tools, with over 18 million daily active users as of 2023.

The Birkin bag by Hermès is one of the most iconic examples of successful exclusivity. The bags are not only extremely expensive, with prices ranging from $10,000 to over $200,000, but they are also incredibly hard to obtain. Each bag is handmade, and there’s a significant waiting list, sometimes up to several years. This exclusivity has made the Birkin a status symbol, with demand far exceeding supply, ensuring its continued desirability and high resale value. Hermès reported sales of €11.6 billion in 2022, with its leather goods and saddlery division, including the Birkin, being the biggest contributor.

These examples show that exclusivity, when executed thoughtfully, can be a powerful tool for all companies. Whether through invite-only launches, premium tiers, or targeted early access programs, exclusivity can help create demand, build a loyal user base, and differentiate a product in a crowded market.

The Growth Trap

However, not every company has successfully navigated this balance.

Blockbuster’s story is a stark reminder of the dangers of clinging to outdated models. At its peak in 2004, Blockbuster had 9,094 stores worldwide. Yet, by failing to adapt to the rising trend of streaming services — services they had the opportunity to acquire or develop — the company declared bankruptcy in 2010. Meanwhile, Netflix, which Blockbuster famously passed on purchasing for $50 million, now boasts over 238 million subscribers globally and a market cap of around $146 billion.

Clubhouse, the invite-only social audio app, initially gained massive attention due to its exclusivity. However, this exclusivity also became a growth trap. As other platforms like Twitter Spaces and Facebook Audio Rooms launched similar features that were open to all, Clubhouse struggled to maintain its early momentum. The app saw a significant drop in downloads and engagement once the novelty of exclusivity wore off, and it faced challenges in sustaining long-term growth.

When a company relies too heavily on exclusivity, it may become complacent and less focused on innovation. The false sense of security from a loyal but small user base can prevent companies from evolving and adapting to broader market trends.

Exclusivity also can leave a company vulnerable to competitors who offer more accessible alternatives. As competitors capture the broader market, the exclusive brand might find itself marginalized.

Uber initially focused on its premium Uber Black service, targeting wealthier customers who valued luxury. While this helped establish the brand, it also limited Uber’s market. When the company launched UberX, a more affordable service, it unlocked massive growth and quickly expanded its user base. However, if Uber had stuck exclusively to Uber Black, it would have likely been overtaken by competitors offering lower-cost ride-sharing options like Lyft.

Free Trials matter

A 2023 survey found that 75% of consumers are more likely to purchase a product if they have the option to try it first, yet many subscription models lock the best features behind paywalls. Companies that follow a similar model may be leaving money on the table. In fact, businesses that offer free trials or freemium models see conversion rates as high as 25%, according to a study by ProfitWell. This suggests that a more accessible approach can lead to substantial revenue growth over time.

Missed Opportunities in Revenue and Customer Base Expansion

By restricting access to their best offerings, companies risk limiting their potential market. New customers, unable to try out the full product or service, may never convert into paying subscribers. And even loyal customers may grow dissatisfied with the limitations and seek alternatives.

This is not just a hypothetical risk; a study by McKinsey found that 39% of consumers who cancel a subscription cite “lack of value” as the primary reason.

On the other hand, companies that prioritize accessibility often see remarkable returns. Jio Cinema’s decision to offer IPL streaming for free across all networks, for example, drew in over 500 million viewers, capturing a significant portion of the market and delivering a superior customer experience. This move not only expanded their audience but also set the stage for future monetization opportunities.

A Delicate Balance

In today’s fast-paced business environment, companies need to innovate and adapt continually. While exclusivity can create short-term gains, it often comes at the expense of long-term growth. Companies that focus on broadening their reach and making their best products accessible stand to gain more in the long run.

As the market continues to evolve, the question for businesses remains: Will they choose the short-term allure of exclusivity, or will they unlock the doors to broader opportunities? Share your thoughts.