Pay-as-you-go lifestyle changes how consumers view products, services
by Jonathan Hurvitz. Subscription-based businesses are proving to be among the most resilient in this economy.Wednesday, 31 Mar 2021
by Jonathan Hurvitz. If resilience and adaptability are two of the most important characteristics of a robust business in 2021 – which most experts will agree they are – then it is certainly worth looking at how successful businesses remain sustainable and follow suit, or at least try to learn from them. According to a June 2020 Deloitte article, subscription-based businesses are proving to be among the most resilient, with research suggesting that 80% of companies are sustaining or growing their subscriber base.
The subscription economy is most often associated with technology companies, specifically software, thanks to the popularity of Software as a Service (SaaS), where software is not purchased outright but rather used on a subscription basis. An article by Geneva-based CIGP Wealth Management says, “This wave has set off what could be the next major shift since the industrial revolution”. Comparing the potential of the subscription economy to an event as significant as the industrial revolution may seem bold, but when the power of digital tools is taken into account, it is not just plausible but packed with potential.
For brands, the subscription model is about relationship building. As CIPG points out, “In traditional transaction models, the bulk of the revenue generation happens at the start of the relationship. Subscription models work the other way around, with customers gradually spending more as they become more familiar with the brand, more trusting of it, and as the brand continues to deliver on – and surpass – their expectations.”
Subscribe for convenience
The value once ascribed to ownership is gradually diminishing, thanks to changing customer behaviour and a more transient lifestyle. Millennials, according to Forbes, don’t own anything because it tethers them. Understood differently, it’s about the thrill of the ride, not owning the car. In 2021 consumers want products and services that address their specific needs at the exact time they are needed and expect them to be easily – almost seamlessly – available. This requires that brands smartly and strategically (and responsibly!) collect and analyse data to ensure flexible, responsive and transparent reactions to client needs and wants. The popularity of brands such as Netflix and Spotify – and Showmax, Sage and The Daily Dish locally – can be attributed to their mastery of transparent and personalised services.
Subscribe for the experience
The subscription economy is about people and not products, which necessitates brands and businesses to operate from the point of view that success is not about the product or service, but about the people who use them – how they use them, where they use them and when they use them. ‘People, not products’ – as the unofficial credo of the subscription economy – speaks to the importance of direct relationships and relevant, quality personalised experiences at every touchpoint.
The subscription model turns the idea of ‘build and they will come’ on its head. Rather than perfecting a product and then releasing it to market, subscription brands know that perfection is less important than response to user feedback and using that feedback to further improve, customise, build and expand. Again taking the cue from the software industry, “the idea is to convert one-off purchases to ongoing recurring sales by offering new content and more customisation,” according to Profitwell.
In an article titled, “Why the subscription economy is about people, not products”, the gist of this model is summarised in five key points:
- It’s about access, not ownership.
- It’s about customisation, not generalisation.
- It’s about constant improvement, not planned obsolescence.
- It’s about automating improvement and relationship building.
- It’s not about perfect, it’s about responsiveness. The brands that are the fastest to respond are likely to be the frontrunners in the flexible new subscription economy.
Jonathan Hurvitz is the Group CEO of online retailer Teljoy and a registered Chartered Accountant in South Africa.
– Receive the Retailing Africa newsletter every Wednesday • Subscribe here.