Subscription and sharing services address new consumer values.
The parallel emergence of the subscription economy and the sharing economy is no coincidence. Both reflect an increased consumer desire for access. With consumers now prizing experiences over products, brands must find new ways to deliver value to their customers. Subscription services have become trendy and offer tremendous value for both brands and consumers, but they are only part of a bigger picture.
Brands need to fundamentally understand the subscription model is more than just another pricing option; it’s a profound change in the way consumers behave and companies do business.
Customer desires have changed
Terms like “sharing economy,” “access economy,” and “post-ownership economy” all refer to the idea that modern consumers value access to services more than owning a product outright. There are two key components driving the rise of the access economy:
- The ubiquity and immediacy created by mobile devices allow consumers to access goods and services whenever and wherever they want.
- Consumers want to use that ubiquity and immediacy to access services without necessarily having to buy one-off every time.
While these are simple concepts, they represent a significant shift in the way consumers interact with brands. Consumers understand the power of their connected devices and want to use that connectivity to enhance their lives in the most efficient way possible. They are no longer content to buy a product or service and then see how it benefits them. Rather, with a subscription model, they can test a product knowing that they can discontinue their subscription at any time. Successful companies understand these new consumer values and incorporate them into their sales strategy.
A pricing model that benefits companies
Software companies have been incredibly successful adopting the subscription service model. Adobe, for one, transitioned the majority of its product offerings to a subscription basis in which users pay a monthly or annual fee to use programs like Premiere and Photoshop, rather than buying the titles outright. The result is a lower initial price point that removes barriers for consumers and offers great value to the company.
Some software companies are experimenting with the idea of a pay-for-use model that could tap into the microtransaction system already producing huge dividends for video game developers.
But not every industry is conducive to the access economy. Cars, for example, continue to pose a significant challenge despite the obvious opportunities. A subscription car service sounds great for consumers: not responsible for upkeep, don’t have to pay for insurance, can upgrade to a larger vehicle when necessary, etc. But for companies, this means a large financial burden with huge overhead costs, unpredictability about how long consumers will use the cars, and an inability to recover the cost of vehicle depreciation.
Many of the same barriers for car manufacturers also affect many consumer electronic brands. These items have the potential to be sold on a subscription basis but still have significant financial hurdles before there’s a fully developed market. Any industry has the potential to incorporate subscriptions into their service offerings, but making it work will take some creative thinking.
Leveraging for long-term relationships
Software companies have tapped into the most valuable aspect of subscriptions: the ability to build a long-term relationship with the consumer. The true power of the subscription model is that it moves customers to integrate a brand into their lives, creating a deep and long-lasting relationship that can be leveraged well into the future. Once consumers are connected to a software developer, for example, they are then engaged in an ecosystem that offers enormous opportunity for cross-sell and up-sell at each touch point. Brands can capitalise on this strategy by positioning their offerings in a way that addresses consumer values and creates a profitable long-term relationship with the customer.
Brands that only consider subscriptions as a different type of payment system are likely to pay the price for their mistake.
The rise of the access economy represents a new era for ecommerce. We’re seeing the maturation of the ecommerce space in terms of brand offerings, but also in terms of consumer habits. The most successful brands will tailor their offerings to cater to modern consumer needs and then leverage those new models for long-term success.