Subscription Business

The subscription businesses are increasing, making the end of ownership more and more likely. Contrary to what some predicted, subscription fatigue never materialized. 34% of Americans say they’ll likely join up for new subscription services during the next two years, according to a study by eMarketer. Currently, an American has three.

Traditional business models are being turned on their heads by the way we consume, and this is true not just for the business-to-consumer (B2C) market but also for the business-to-business (B2B) industry. Consumers are choosing usage and access over ownership of a thing. And businesses all over the world are vying to provide subscriptions that can be accessed online and are powered by software, data, and analytics to suit these needs.

According to a recent analysis by Manifesto Success Architects, which polled 504 senior business leaders, 70% of them agreed that subscription revenue is essential to future commercial growth, this is a race worth participating in. The consultancy company also discovered that only 7% of brands are presently making significant revenue in this manner, which leaves plenty of room for opportunities for companies thinking about using subscriptions as the foundation of their business strategy.

Here’s a look at how subscriptions are currently being offered, together with predictions for the future of this business model, to obtain a general idea of the current subscription trend.

Large Players Focus on Improving the Subscription Business Experience

The customer’s subscription experience will increasingly serve as a key differentiation in the most competitive marketplaces. The precise nature of this encounter isn’t predetermined by any prescriptive formula. Netflix does it with its content and cutting-edge technology, while Amazon accomplishes it with the breadth of its services. Microsoft thanks to its suite of apps’ easy accessibility and first-rate technical assistance.

The efficient gathering, monitoring, and utilization of client data—which big businesses like Netflix, Microsoft, and Amazon have in abundance—is crucial to improving the subscription experience. These businesses can keep track of a user’s scrolling and browsing patterns, time spent on various pages, likes, and dislikes, and other preferences.

The popularity of the recurring revenue model is being accelerated by the capacity to acquire rich data from subscribers. It lets businesses streamline their operations, give context to client interactions, and find new sectors of business to enter.

There is a shift toward the subscription model in more industries

More sectors than ever before are switching to subscription-based business models. As it struggles with the emergence of what some refer to as the post-ownership era, the automotive industry is hastening this shift. For instance, Volvo predicts that by 2025, half of all its vehicles will be sold through its subscription service.

The Internet of Things (IoT) is rapidly gaining ground in a variety of industries, from smart homes and manufacturing to logistics and transportation. The Alexa smart speaker, Fitbit wearables, and Nest thermostat are examples of linked gadgets that readers may be familiar with. The potential for business usage is [actually] much greater, according to consulting firm McKinsey, who forecast that B2B applications will account for close to 70% of the value that will flow from IoT over the next five years, amounting to close to US$5 trillion in revenue. Consumer adoption of fitness bands and connected home appliances may generate more media buzz, but the potential for business usage is much greater.

Healthcare (subscription medicine, for instance) and financial services are both launching subscription models. These services include what Ernst & Young refers to as “personal financial operating systems,” which give subscribers access to integrated tools, intuitive user interfaces, and proactive, personalized financial advice. The software industry, which was the model’s first adopter, is naturally in charge. By 2020, according to Gartner, eight out of ten established software suppliers and all newcomers will offer a subscription-based strategy.

Businesses are Using Subscription-Based Services to Manage Their Core Operations

Increasingly, businesses and organizations are opting to pay for access to resources only as and when they are needed, rather than purchasing the IT infrastructure and resources necessary to run their operations. This shift to a market where anything may be purchased “as-a-service” generates a new playbook for conducting business. Businesses can concentrate on enhancing their core capabilities while contracting out a variety of subscription-based services that can be accessed whenever needed. For example, business application software to manage back-office operations or expert services for marketing, sales, accounting, and customer support.

More Partnerships are being used by businesses to combine services

A rising number of companies are forming alliances to offer profitable packages or bundles of services that may be sold repeatedly. These companies can raise the average order value by grouping products together, which encourages customers to make larger purchases because they perceive a saving. By combining new products with best-sellers, businesses may also introduce their clients to new products.

Large companies like Apple, Amazon, and Microsoft have mastered bundling, and as a result, these recurring revenue streams are allowing them to achieve phenomenally high margins. Esquire, Wired, and the Wall Street Journal are just a few of the top 300 newspapers and publications that are included in Apple News+, a subscription service that costs US$10 per month and is offered by Apple.

“Media, fashion, travel, and health are some of the consumer networks that we are starting to see. It will be a race to discover which brands and merchants can create credible/compelling bundles, with cheap finance serving as the munitions, according to Scott Galloway, a marketing professor at NYU Stern School of Business.

Is ownership actually coming to an end?

It’s difficult to foresee how the business landscape will change and how much subscriptions will dominate in ten years. Even if ownership may not end, we are considering the possibility of significant change.

Businesses in the B2B sector will keep focusing on simplifying and efficiency to get the most out of their limited resources. And this is how subscription services that are usage-based (also known as pay-as-you-go) are likely to gain popularity. Mobility as a service is likely to take off with the introduction of autonomous vehicles, eliminating the need for parking and insurance and even (eventually) changing the way that transportation infrastructure works.

Everything that may now be provided as a service, including meal kits, clothing, fitness classes, financial advice, and subscriptions to Ikea furniture, has the potential to drastically alter every part of our daily lives. Anything you can think of will have a subscription available.

As subscription businesses are on the rise, they need integrated subscription billing solutions to streamline their recurring revenue.