‘Subscribe is the new shop.’ – Are subscription business models taking over?

Jul. 17, 2014 | by Alex Shilton

There was once a time when subscriptions and magazines were an established and monogamous pair. But now, the subscription plague is quickly spreading between industries. The modern day consumer wants on-going, easy access to their everyday products and commodities. As such, the one-time purchase may not be as appealing anymore, but instead, a flexible service that can last a lifetime may be.

A subscription service could be anything from the perks of your Amazon Prime, to a monthly visit from your window cleaner. A subscription is a type of billing option, which charges an account on an annual, monthly, weekly, or even daily basis. With this model, companies instantly look to gain a subscribed consumer who offers the business a possible lifetime loyalty. This can therefore improve their revenue on a long-term basis. For consumers, they may find that a subscription saves them money on a product they buy regularly and could avoid that daunting trip to the shops. The most significant factor for the success of a subscription model is outstanding value – if the consumer does not believe they’ll receive this, then there will be no subscription in the first place.

Subscription businesses are nothing new. We have seen them bravely enter the Dragons Den, pitching for investment in a company that constructs a quarterly bill for ‘members’ who sign up for having their olive oil delivered to them. Yes…olive oil. Although that may not have worked out, you’ll be more familiar with companies such as Netflix and Graze. Who’d have thought healthy snacks being put through the letterbox could be the next big thing? Jamie Oliver missed out on that one. A common submodel of subscription is ‘Freemium’ – a term that sounds galactic! Spotify embraces this model, as they provide users free music content but restrict access to their premium features to paying subscribers. Last year, Spotify reached over 24 million users, including 6 million paying the subscription fee. Their philosophy is that once they get you hooked on their service, you’ll be crying out for more.

Companies have now been set-up that specialise in subscription business models and help to secure lifetime value customers. The leader of these being OrderGroove, who believe they can help a business by dramatically increasing annual spend, purchase frequency and customer lifetime value by up to 400%. Their company motto is ‘Subscribe is the new Shop.’ Whether this is true or not, thousands of companies are opting to be a part of it, so what will this mean for the world of advertising?

This shift requires new ways of thinking, and the upmost importance in customer care. Subscription services will only be successful if they have an extremely attractive proposition, therefore the key starting point is a product and service that consumers trust. However, a sale can never just be a statistic. Subscriptions are about customer relationships. You must understand your market better than anyone else; get to know the people, what do they want? What experience are you going to offer them? There is no fast tracking here. Advertisers must understand how these meaningful relationships evolve over time. And what to expect in return: an engaged and loyal customer instantly. From this customer base you establish stability, with an opportunity to secure revenue in the long-run.

Subscription model businesses are on the rise. They may have not yet ‘taken over’ so to speak. But have a look at your most recent bank statement; amongst the mist of your one-off purchases, it is likely you are starting to see a collection of recurring payments going out. This is just the beginning. Be prepared for the subscription model boom – as those who don’t, may be left out in the cold.

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    • MOOCs as Partworks | OUseful.Info, the blog...

      […] of related but also not, this article from icrossing on ‘Subscribe is the new shop.’ – Are subscription business models taking over? and John Naughton's column last week on the (as then, just leaked) Kindle subscription model - […]Jul 22, 2014 04:57 pm

    Please note: the opinions expressed in this post represent the views of the individual, not necessarily those of iCrossing.

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