As the term goes, the subscription economy deals with the business of rendering subscriptions to the customers. All SaaS companies, including Netflix, Hotstar, or Spotify’s entire range of businesses rely on a subscription model.
The 21st century is seeing a huge emergence in the subscription economy in the country. There is now a teeming inclination from the product economy towards the subscription business model. Simply put, there is a continual relationship with the customer who is taking the service.
Its changing Impacts in our Lives
Gone are the days when the company-customer relationship was a one-time deal. Well, it’s not like the relationship ends with the swipe of a card. Now, the product economy and product ownership are becoming old news. People’s new mindset is all about, ‘why own a thing when you can just subscribe to it?’
SaaS and cloud solutions have successfully left an indelible imprint in the newer technologies. It has replaced on-premise hardware and traditional servers too. While there is a definite decrease in the factor of ownership, there is a stiff increase in user-ship, where people prefer to own less but use more services.
And why is this happening? What are the reasons behind it? This blog will certainly put all these queries to rest.
As customers, we tend to value access to more ownership. It is now easier to choose how to pay, subscribe or unsubscribe to services, or to simply tailor them to put to our use. Having the freedom to use service anywhere, anytime is what subscription economy is all about.
Nonetheless, this is not just inhibited to the customers, even businesses too do not wish to take a backseat. Thanks to the more flexible and newer versions of the subscription economy that has made it possible for the businesses to adapt.
Subscription Economy Index and its Usage
Let us first begin by understanding what exactly the subscription economy index is. Basically, this compares the success of any two or more companies, whose primary method of revenue is a subscription.
It strives to support its clients in monitoring, managing, and billing subscriptions. The model clearly shows how high the growth rate is for the companies that have chosen a subscription business. This growth is mainly in the B2B approaches, although B2C subscription models are not left far behind.
A report given by the Zuora’s subscription Economy index states that subscription companies across Europe, Asia, and North America have seen an 18 % compound annual growth rate in the last seven rates. This accounts for more than 300% growth in the sales sector.
Aside from this, it needs to be noted that the fastest-growing industries are the communications and the IoT( Internet of Things). Nevertheless, they are seeing an increase in the churn rate. Also, the annual churn rate within the subscription economy index is somewhere around 20% to 30%.
Today’s customer finds subscriptions at every point – be it media, sales, entertainment, or retail. There exists a subscription economy in almost every sector where customers are spending money.
Now that wise the advent of digital technology, opting in and out of subscriptions has become simpler than ever – with a few taps on the smartphone.
Quality and Variety to the Rescue
These pay-as-you-go services have benefitted from predictable and flexible revenue projections. Large economies of scale owing to relatively smaller fixed costs and data-driven insights from direct customer terms also helped in the same.
It is pertinent to understand the subscription economy index to perfectly know and get the subscription economy. With the growth in the subscriptions, when compared to the other kinds of sales, it can completely change the ball game altogether.
Quality is something that helps differentiate two successful businesses. And also how well it connects to the audience is another vital point. Having said that, subscription businesses differ from the typical models as they render some quality of uniqueness.
Now this quality can range from product discovery or it can be getting service at your doorstep or it may also include saving a trip to the nearby store.
Let me give you a small example. The subscribers to Amazon prime is definitely taking a notch up. You have the seamless freedom to watch a multitude of movies, series, or documentaries and that too in different genres.
You also have the option to stream it with multiple devices and also on the website. It all simmers down to variety and quality that makes or breaks a deal. And that is why it is important to emphasize its unique selling point.
As Gautam Gupta, Co-Founder, and CEO of NatureBox rightly quotes it, “Focus on the customer. For many categories of products, the majority of consumers don’t want to be locked into a subscription model. Therefore, you have to convince a potentially skeptical consumer to sign up. You have to prove to the customer that you have the best products or offer compelling value. To do this, you need to know who she is, what motivates her to buy, and how you will keep her. The subscription implies that you will provide value on a sustainable basis, so think about what happens after the first few months. How do you make the experience unique?”
While it needs to be seen that the traditional media is also facing a high churn rate, all due to the amount of contention in the industry. In the meantime, subscriptions too are growing but are limited by the existing payment methods.
The growth of digital subscriptions goes hand in hand. As customers lean more into getting frictionless solutions and wish to grab the easiest route to do a payment. You can see most of the payments for the subscription services are through electronic methods.
Though consumer’s profitability and interest waxes and wanes. While the saturation for the subscription market seems plausible for particular verticals, the ones supported by digital software are most likely to adapt to a subscription model.