According to Credit Suisse, a total of $420 Billion was spent on subscriptions in the US back in 2015. This was an astounding leap from $215 Billion back in 2000.
The Subscription Economy®, a term coined by Zuora’s CEO Tien Tzuo, is used to describe a “new era” of companies and business models that are more focused on developing customer relationships.
The Subscription Economy® Defined
What has been observed in the last few years is that customers have changed. Customers want to interact with businesses in a new way. They want results and not ownership. They don’t want products and services that serve the general populace. They want customization.
In response, businesses are radically changing their ways. Many businesses have stepped up to the challenge to engage with their customers in a new way, by forming long-lasting relationships. Some of these companies that are smashing it are: Amazon Prime, Netflix, Salesforce, Spotify, and Uber, to name a few.
With subscription services, customers are drawn to the “subscription experience”. These experiences are built around the customization of the customers’ needs. This is far more valuable than a company that merely offers a single product and a one-time purchase.
The Benefits Of The Subscription Model For Merchants
So what’s in it for businesses to take advantage of this subscription economy? Predictable income, of course! But wait, there’s more:
- No more missed or late payments
With automated subscription billing, you can set everything up with your customer from the beginning and enjoy the payments coming in regularly, without interruption.
- Cut admin costs
No more wasted time on chasing payments, drafting invoices, and other admin tasks by implementing payment automation.
- Optimize the customer experience
No more hassling with manual payments. This “set it and forget it” method makes it a seamless experience so that your customers don’t waste their time.
- Promotes customer retention
Since payments are automated, customers spend zero amount of time thinking about making their next payment. This means they will stick around for a longer period of time.
The Benefits For The Subscription Model For Consumers
Subscription services offer an opportunity for consumers to have their payments made without friction. They know that when they sign up for a subscription service, they can expect a specific good or service at the same time, every month.
This type of service also gives businesses valuable feedback as to what they like and don’t like. That way, every month, based on their feedback, the business can offer even more personalized goods and services, delighting their customers even more. This inspires greater customer loyalty, and of course, more revenue.
What To Consider Before You Start
Before you take advantage of this incredible, lucrative opportunity, you must first take in the following considerations:
- Price – The biggest challenge to subscription services is delivering real value at a great price point. Set your prices based on what competitors are doing.
- Security – It is imperative that businesses do all that is necessary to protect their customers’ data. You can ensure this by selecting a provider that makes security their top priority and as part of their services.
The Subscription Economy® continues to grow because consumers have expressed what they expect from businesses. They want personalization and customization. Many businesses in many verticals have answered their call. It’s about building relationships through regular customer engagement. Are you up for the challenge?