Are Consumers Ready for the Subscription Economy?
The idea of subscriptions is not something new to consumers, as the concept has been around for decades; the only difference is that its reach has far surpassed newspapers and magazines. The expansion of the subscription model is most strongly felt in the developed economies where it has evolved to include automobiles, transport, media, utilities, fashion, food, and even accommodation.
Aspects in favor of the Subscription Economy
As the name itself suggests, ‘Subscription Economy’ or the “Digital Economy” describes a structure where consumers are moving away from the traditional one-time payment model for a pay-as-you-go model; the thought process has shifted to ‘why purchase a single DVD when you can have access to a much wider selection by subscribing to Netflix for a monthly payment?’ There was a time when you’d have to purchase Microsoft Office or Adobe products with your new computer, but now, they follow the SaaS (Software as a Service) model. You make small payments every month in exchange for the service, and when you wish to discontinue, you stop paying.
This massive transformation is attributed to the rapidly changing consumer behavior where the need to have more experiences is slowly taking over the desire to own – especially among the millennials. Today, instead of owning a car, paying for it upfront and getting stuck in a cycle of EMIs, consumers would much rather subscribe to a car service for a monthly fee and not have to deal with all the baggage that accompanies owning a vehicle. Not only will it be easier on the pocket, but there is the flexibility of choice as well. When you purchase a car, you are stuck with the same model until you get a new one, but in a subscription service, you could easily upgrade or downgrade between different models with much less hassle.
Ultimately, it all comes down to consumer needs and desires. Consumers have grown tired of accumulating things they eventually no longer use or want, so the subscription model is flourishing in this opportune time. It proves to be time-saving and convenient with minimal maintenance costs—all without compromising on excellent user experiences. If anything, it has opened up access to all the things that may have seemed out of reach otherwise. Luxury cars, designer-wear, grooming products, software, curated meal boxes – you name it – and there’s a subscription in place for it.
Aspects not so much in favor of the Subscription Economy
The subscription economy sure has plenty of benefits. However, are we really willing to forego ownership as long as we have access? A lot of times, the utility of a product is not the only driving factor behind a purchase. There is also a sense of independence, control, and confidence that comes with purchasing to own, and that is something which cannot be replicated in this model. Also, ownership for many is still in a way associated with an individual’s social standing and prestige. Hence, when making the switch to a subscription model, it won’t solely be about making small monthly payments instead of a one-time payment—it’s also about changing societal mindsets.
What’s in it for Businesses
As for the businesses, almost all future-oriented corporations are slowly transitioning to the subscription model as it allows them to develop a dynamic relationship with their consumers. This model further translates into a recurring income received everything month, as opposed to closing the sales after a single payment. It is all about understanding the consumers’ changing likes and dislikes, catering to them on a regular basis, and keeping them satisfied and engaged. Moreover, advances in technology have been a huge catalyst in the adoption of the subscription model and it will only continue growing in the future.
I won’t be surprised if as many as 80% of companies are experimenting with some kind of subscription model by 2020. Denying a subscription-based business model is like denying digital, cloud, and a host of futuristic technologies into your business. Importantly, it is denying the intent to deliver superior consumer experiences. In the end, that is what matters. A significant section of consumers are/will be thrilled to finally gain access to products and services that eluded them for ages. The Subscription Economy is making it possible and with a promise to deliver an experience of a lifetime. I believe that the Subscription Economy is here to stay. What do you think? Do drop your thoughts in the comments section below.