From phones to cars, products no longer rule for an increasing number of companies. Individualized customer service is king in the “subscription economy.”
A Forbes article from earlier this year explains, “In the Subscription Economy, every company must better manage a direct, complex, responsive, multi-channel relationship with its customers. Customers are absolutely key in this relationship and rather than putting the focus of the business on the ‘product’ or the ‘transaction,’ subscription economy companies live and die by their ability to focus on the customer. Now, the formula for growth is focused on monetizing long-term relationships rather than shipping products. The shift to the Subscription Economy brings with it the need for a completely different approach to building your business.”
One practitioner, Volvo recently announced a subscription service for a compact SUV. Techcrunch.com reports, “Volvo has a subscription car service, whereby you can get a new vehicle for a flat monthly fee, including insurance, maintenance and service. It’s not the first carmaker to provide this kind of ownership alternative, but it may have the best deal in the business at the moment, with its ‘Care by Volvo’ exclusively for the new XC40 SUV.” The rate of $600 per month proves attractive, as the purchase price with the same amenities is $35,200.
Likewise, the social media network, DriveTribe, details how Porsche Cars North America introduced Porsche Passport, “a new sports car and SUV subscription program, which provides members flexible access to Porsche vehicles via a mobile app.” This month-to-month subscription program offers frequent vehicle exchanges, unrestricted mileage, and on-demand access for up to 22 different Porsche models.
Cadillac also recently started a program that offers motorists the option to drive multiple models for $1,500 a month.
Forbes reported in a May 2017 overview of the “subscription economy” model: “Today it all comes down to the customer. A focus on the customer, rather than the technology or the product or the transaction, is the force that drives the subscription economy. To succeed with a subscription model, businesses must serve their customers, understand their needs, and keep them happy over time.”
Forbes queries, “Why develop your own analytics system when you can pay for a service that is instantly available and higher performing? Why own a car when you can rent a new one as-needed, without worrying about insurance, parking or maintenance? Why trek to the pet store every time you run out of dog food when you can have a high-quality product delivered to your door on a regular basis?”
And for the companies offering subscription services, the value comes with the data they gain from the subscriptions rather than the revenue from selling the product outright. Forbes explains, “Just take a look at Apple. Every day that passes, Apple cares less about how many iPhones they ship, and more about how many Apple IDs they can gather, and how much revenue they can generate per ID. That’s why they rolled out their new ‘Upgrade Program,’ which is basically just an iPhone subscription. As it turns out, getting you to subscribe to a phone is way easier than asking you to make a discrete purchase every year.”
Proponents of the subscription economy argue that it saves on up-front costs, provide access to the latest stuff you want — like phones, cars and movies — and, over time, provides an individualized customer experience refined over time through technology.
“That curation aspect of subscriptions is something traditional businesses can’t provide. It allows a company to create a unique experience for each customer. And thanks to learning technology, the longer a person holds a subscription, the better and more specified the experience gets,” writes Ilya Pozin, founder of Pluto TV for Inc.com.
Businesses that have adopted subscription-based offerings have realized many of these listed benefits for their customers which has, in turn, resulted in stronger sales and stability for their organization for several reasons. When a service is convenient, easy to renew, scale up or down, and is customized to the specific tastes and needs of individuals, it leads to increased loyalty. In turn, a business usually has more consistent cash flow and predictable revenue that could give higher valuation.
Speaking from Sinu’s own experience, providing subscription services rather than the pay-as-you-go model forges stronger customer relationships. We have to understand the changing needs of our customers and what their goals are so we can best serve them and stay ahead of the competition. It really puts the onus on us to stay ahead of the curve and, in the end, that builds trust and confidence as a business partner and motivates us to be our best.