Insights on “The Subscription Economy” – A Clive Angel Blogpost
It is highly ironic that in this materialistic and asset rich society that we live, that the subscription economy is taking off. People are choosing to subscribe for services and the use of assets as opposed to owning the asset outright. Ditching richly and often personal possessions in favour of having real time access, instant updates and the ability to pay based on a specific needs and measured usage. Welcome to the world of the subscription economy.
A subscription is any service whereby a consumer pays a recurring fee for the ongoing use of an asset and / or access to a customer service.
The best way to describe the benefits of a subscription business from a businesses perspective is to look at some of the significant transformations as a result of successfully implementing a subscription model;
Firstly the executive decision makers of a subscription business need to shift strategic focus from product production lines and product development to becoming customer centric and service delivery orientated. The growth strategy for a subscription business is built around the customer and not driven by the product. Subscription businesses are all about providing instant, relevant and seamless end-to-end services to a loyal and engaged customer base. The customers’ current and ongoing future needs are central to the execution management’s business strategy.
Marketing will always be core to growing any successful business, subscription businesses are about securing and maintaining customer relationships. To achieve this marketing strategies will need to be shifted from focusing on the promotion and sale of physical assets to providing quality and service driven customer experiences. The ability to use artificial intelligence and machine learning to analyse and interpret data will drive the transformation of marketing strategies from a sales-based approach to an engineering focused data driven methodology.
Customer interactions will need to be become central to overall product development. Instead of being dependent on feedback as a result of media driven marketing strategies businesses will place reliance on user generated feedback and curatorship. The result marketing strategies will evolve from reactively pushing product through traditional media channels to proactively engaging real time customer feedback, based on experience, impacting the product architecture.
Financially, the business will become more cash neutral as income is earned over the life of the products usage or sevice. Financial models will be transformed from the receipt of unpredictable and lumpy, one-off upfront purchase considerations to reliable and predicatble annuity income streams.
As customer behaviour shifts from the need to own physical assets outright to the desire to pay based on access and usage, the levels of customer service and engagement will have to increase substantially. To maintain customer loyalty and ensure continuity of subscriptions management needs to develop deep customer relationships premised on analysing data sets, engagement history and feedback.
Customers will no doubt also benefit tremendously from subscribing to, as opposed to owing assets. Some of the fundamental benefits include; The customer having an all-inclusive contract VS the exposure to additional costs for insurance & maintenance. The customer receiving real time instant updates VS waiting for the opportunity to purchase and or take delivery of an upgraded asset. The customer receiving a service that is flexible and tailored for their needs VS purchasing an asset off the shelf fit for a specific purpose. The customers cash outflows are over a period aligned with the benefits received VS incurring payments upfront with the benefits to follow from use down the line. The customer receiving tailored services based on their own input and feedback VS having to purchase an asset based designed for the general market.
The marketplace is transforming as customer values shift from ownership toward receiving more relevant, personalised and up to date services, reliably when needed and at the price they want to pay for them. As a result both businesses and their customers stand to benefit from the emergence and growth of the subscription economy.