7 things to know about the subscription economy
Subscription economy is accelerating it’s growth. Nine out of ten British consumers are already subscribers with average spend on services tripling between 2016 and 2017. Why are we so inclined to subscribe and what is going to happen in the future?
Let’s start with a cliché statement: everything is changing. Often at a faster pace than we want it to be. Apparently, in the last few years, areas like retail or banking have become disrupted by e-commerce and Fintech startups and we suspect there are a few more industries to be disrupted in the near future. Technology does not ask for permission. Nowadays, a few Computer Science grads will gather in a coffee shop or co-working space and create something that you or I will use in the next 12 months. The same is happening with the subscription economy. However, luckily for us, this change is not as fast as I just described. Or maybe it is?
Between 2011 and 2016 the e-commerce subscription market has grown from $57.0M to $2.6B. These are just US growth figures in only 5 years.
To not get carried away – the UK is firmly a front-runner as well. Zuora & YouGov 2017 research shows that Brits love to subscribe. They spend more, subscribe more and it’s only going to increase.
Subscription, innovation, disruption and technology. Ok, I get it. But the question remains what’s in it for me and why are people subscribing more?
It is very likely that you and I are going to have more services behind our belt in the next 2-5 years than we have now. Here is why.
1. More time
During this technological revolution, it seems that time is going faster and faster. I personally feel that it just slips through my fingers. Additionally, when I have some free time I want to have good quality rest. I don’t want to check bank statements and look after all my services.
I am already using direct debit for my internet service provider and monthly recurring water bills. My fiancée is subscribing to Netflix. It’s just so convenient to not have to think about payment every month. It feels that those are essentials (bloody Netflix, since when did you become an essential part of my life?) and if someone can give me back 5 mins of my life for every transfer I am up for it.
2. More subscriptions
More and more businesses are moving towards subscription based models. Hence, we will start seeing a shift towards direct debit solutions kicked off by companies themselves. Now we are in a pay-per-product system. You go and you buy, end of the interaction. Ok, maybe sometimes we give feedback about product quality. But that’s it.
Mostly I am amazed how the car industry is testing the subscription based model. The likes of BMW or Porsche can get you into one of their top tier models for 3 700 USD a month. Ouch, that’s a lot. Yes, but spending $100 000 upfront is not easy either. Price combines full servicing and insurance. For a company, it means steady income month over month, loyal customer base and more predictable future. For a user, it’s seamless, premium experience. Car subscription is on one level above rental. It has tiered fleet that you can choose from and switch cars as many times as you like during the month. A vehicle is delivered by a personal concierge, fueled and with personal preferences already pre-set. You can kick-start your BWM showboat with just few thousand dollars. That’s how the subscription economy works. That’s how we are going to shine.
3. Less frustration
Who has time to do payments manually? It is a lot of pain to pay rent monthly. Unfortunately, some landlords (including mine, greetings Mark) require different wire transfer references. Fortunately, with subscriptions entering day to day life it will be less frustrating to transfer money in any sequence required.
Imagine subscriptions to occur as often as conversations about paying bills for goods and services.
I can hear stories in my head already: dude I forgot to unsubscribe from my old landlord. He overcharged me.
And yes, it sounds weird for me as well.
4. More customization
It became evident that subscribers are more likely to jump and change services frequently. Plus companies have data about their clients i.e. you. It is expected that we will be provided with more and more customized services to retain our loyalty.
The thing is that they know everything about us, or almost everything (Hi Cambridge Analytica, Hi Zuck) so they will try to leverage their insights and look after us better. I am expecting a very original welcome screen based on my last meme posted on facebook. Come at me.
5. Better experience
The good thing about competition is that it benefits the customer. With loyalty being lower than usual companies need to compete for our attention. How can they do it with subscriptions? My bet is on fast delivery, original packaging and free goodies from time to time (hint, hint).
Subscription economy will mean a better experience for you, me and your neighbour (ok, maybe not him or her).
6. Clever payment models = less awareness
Every coin has two sides. And where there is a better experience, more customization and more time saved there is also a thing about being aware. Aware of how your hard earned money is leaving your pocket.
The secret about buying and paying is that the payment is supposed to be as seamless as possible so customers will not even notice that their wallet is thinner. Consider three variants:
- cash makes you most aware that you are spending because you hand over a physical item, notes (or in my case coins).
- a card is just a piece of plastic that sometimes beeps and that’s about it. It’s easy to go wild, especially when you own a credit card.
- Subscription… what subscription? With this model or payment medium, you don’t even see when the calendar turned the page and the money is gone.
7. …and in effect less money
As much as I don’t like to do things manually I must admit that sometimes this exercise causes a bell to ring in my head. A few times I asked myself, do I really need overpriced gym subscription taking into consideration that I am going to start working out regularly “next week”?
Enough is enough. More subscriptions and the effect of the subscription economy is going to lead us to oversubscription. Which then will cost us quite a lot.
Recent a study has found that an average Brit will lose out 30 000 GBP over a lifetime on unneeded subscriptions. Yes, 30 000 GBP.
I am not even sure if I can count to 30 000.
What can you do about it?
We came up with an idea. Then with an actual tech solution. A solution that is going to help users and businesses keep control over their spending and in effect save money.
Stay with us as we work on rolling out the beta version. Become an early adopter and enjoy the benefits of putting your subscription fees on its knees.