One of the biggest trends that is shaping the future for brands in every industry is the movement towards subscriptions. The shift towards subscriptions is not just another trend, it is a major paradigm shift as more and more brands are beginning to rethink how they deliver they’re not just their products and services but their entire business models.
In this article, we will talk about how the shift towards subscriptions is changing the way that consumers interact with brands and also how brands connect with consumers. A lot of the key points and data in this article is gotten from the Book “Subscribed: Why the subscription model will be your company’s future and what to do about it“ by Tien Tzuo the CEO of Zuora which is one of the leading evangelists of the subscription economy.
The New Subscription Economy
Over the past few decades, we have been gradually moving towards a subscription economy as more businesses innovate and embrace these new models.
The earliest instances have been traditional newspapers which have embraced the subscription model for decades. Another instance was the emergence of music streaming when platforms like Apple Music or Spotify let you stream an unlimited number of songs for a recurring fee that is more convenient. Another popular instance was Adobe which switched from selling individual access to their products to their whole Creative Cloud for a monthly fee. There was also Amazon Prime which was released around 2005.
Subscription based business models are slowly expanding into other industries as well. What we are witnessing is the end of the concept of “OWNERSHIP” and the Rise of “USERSHIP”. We are moving from a focus on buying and selling single static products to a focus on outcomes and personalized experiences. According to a 2019 survey by Harris International:
74% of people believe that in the future we will subscribe more and own less: This is because although consumers are buying less, consumption is still on the rise. So ownership is going down but usership is trending upwards.
70% of consumers agree that subscribing frees them from the burden of ownership: This shows that a lot of consumers feel like making a purchase may come with other hassles such as maintenance or if a product gets outdated then it becomes obsolete. But through subscription based business models, we can alleviate or eliminate these hassles.
Why Subscriptions?
A common misconception is that subscription services are only for software and media companies. The truth is that no matter what industry you are in, you can integrate subscriptions and create more predictable recurring revenue for your business. However, It is most importantly about creating a better experience for customers and longer term relationships that allow you to innovate on your offerings.
One example is H.Bloom which focusses on selling flowers on a recurring basis. Another example is Birchbox which focusses on cosmetics or Barkbox which is focused on petcare. There is also Legalshield which offers legal support on a monthly subscription basis. Even Caterpillar has began collecting data on metric tons of earth moved in order to be able to bill customers on a subscription basis.
A subscription based business model is also highly preferred by acquirers because the revenue is more predictable and recurring. So if you plan to sell your company in the future then this would definitely help you improve the value of your company. Subscriptions are a great way to improve customer retention and lifetime value as well.
The Internet of Things
There is a new subscription experience being built around the internet of things as more and more everyday items are coming off the manufacturer connected to the internet. The Internet of Things(IOT) is the third wave of the internet that will allow for richer and faster connectivity. This would range from from smart appliances to smart homes and even smart cities. By using embedded devices with sensors, brands and manufacturers can better understand how their products are being used overtime by collecting realtime data. This way they can better optimize the user experience and the brand experience constantly evolves over time. The IOT is revolutionizing the future of subscription services and products.
The New Subscription Experience
In the old model, brands were focused on selling a single product in as many units as possible through various channels. After the customers purchase, they would also have to re-purchase the new version after their product becomes outdated and obsolete.
In the New Subscription experience, Brands are beginning to see their customers as on-going subscribers. This changes everything from how they approach marketing and branding to how they approach billing and payments. The new subscription experience allows brands to build more long term relationships with customers and the experience constantly improves over time. Also, through direct feedback from customers, the experience becomes more personalized to each individual customer’s unique lifestyle and preferences.
In conclusion, the change to subscriptions is one of the biggest trends that is shaping the future of branding as brands continue to innovate and rethink how they deliver their products, services or experiences. They will need to consider more creative ways to integrate subscriptions into their overall model to create longer term customer relationships. Think about what you can offer on a recurring monthly basis and collect feedback to improve it over time. If you enjoyed this article then you might also like my previous one 5 Trends in Tech Shaping the Future of Branding. Below is a final quote from the CEO of Zuora.
