Oh boy, are things about to change. As the world becomes more automated and technologies and services mature into “on demand”, the way we pay for things will transform. These days, you can subscribe to everything from movies (Netflix) to various products (Amazon), food (Blue Apron) and even underwear (MeUndies). All are part of a massively growing “Subscription Economy”. In this burgeoning market, customers will eventually subscribe to anything and everything…and we think that’s a good thing.
Subscriptions are no foreign concept to the western world. Anyone with a cell phone plan or pay-TV service is a “subscriber,” but the concept is permeating through other industries as well. Music was one of the first to be disrupted by subscriptions (Spotify, Apple Music), we see it in the cloud service industry (AWS), and recently rideshare via services like Uber. Subscription box serviceshave been growing like crazy and even established companies like Apple have a subscription plan.
Just last week, Live Nation created the “Festival Passport” that allows avid fest-goers access to up to 90 festivals for $799 annually. They did the math and figured giving people a wide array of choices would overall be better for their bottom line. A win for the experience generation.
Other companies are tapping the market as well. Zuora for example, created a subscription management platform for businesses. They process about $35 billion dollars worth of transactions for more than 800 customers around the world, including Ford, Dell, DocuSign and The Wall Street Journal. They are huge proponents of the subscription economy and through their leadership, they’ve found that subscription businesses are growing at nine times the rate of the S&P 500. Also, according to the Economist, “80% of companies are seeing a change in how their customers want to access and pay for goods and services and 50% of these same companies are changing their pricing models as a result.”
The subscription economy is driven by the customers themselves. Subscriptions are about relationships, and relationships propel businesses. In fact we’ve graduated from a product centric economy to a relationship one where customers want more than just great products. Customers prefer access, over owning things. Subscription economy companies live and die by their ability to focus on the customer. There’s a whole “experience” behind a subscription, and like Tien Tzuo, Zuora CEO mentions, “People just want an outcome. People want a service. People want to know the vendor, the brand, the person on the other end that’s providing that service in a trusted relationship.”
Like anything, the subscription economy will be met with some challenges, but it provides flexibility, scalability, lower upfront costs, predictable budgeting, the ability to launch new features & bundles, and ultimately a more valuable experience for the customer. Done right, people won’t need to worry about owning anything in the future and they get the freedom to try, by, upgrade, downgrade, pause or do whatever they need to be satisfied.