The subscription economy is not new. In fact, the membership-based business model has been around since the 17th century. Publishers of books and periodicals basically introduced subscription as a business model. In order to keep the sales of magazines and periodicals, writers and novelists serialized their work to keeps readers hooked on cliffhanger installments. With this business model, publishers are guaranteed up to 24 months of sales and readership.
Recently, the membership-based business model has been gaining a foothold. Nowadays, consumers can subscribe to a wide array of products, services, and experiences. From sunglasses to shavers and from coffee to concerts—a growing number of businesses are adopting the business model. With the rise of the subscription economy, customers now have access to more options. On the other hand, companies benefit from the membership-based business model by having a steady revenue stream. However, the perks of the subscription economy go beyond options and revenue. Experts believe that the membership-based business model is the revenue model of the future.
Benefits of Subscription Economy for the Customers
McKinsey & Company conducted a study to understand the subscription habits of more than 5,000 U.S.-based consumers. Their findings indicate that subscriptions have become a common purchase method for products and services online. In point of fact, more than 40 percent of the participants have at least one subscription. There are a number of reasons why such is the case:
- Customers appreciate the convenience of hassle-free shopping. Once the subscription has been set, products and services are delivered automatically at their doorstep.
- Personalization is also a key driver to why the subscription economy is flourishing. Consumers are given the freedom to modify their purchases based on their preferences. With this kind of freedom, subscribers receive the best possible experience in making their purchases.
- Lastly, value pricing is a common practice within the subscription economy. Products and services are bundled in a way that customers are offered the best savings. Thus, it is not surprising that consumers subscribe to a membership-based business model.
Why Should Companies Seriously Consider the Membership-Based Business Model?
Tien Tzuo, founder and CEO of Zuora and author of “Subscribed: Why the Subscription Model Will Be Your Company’s Future – and What to Do About It” believes that people’s buying habit has changed for good. Customers now prefer outcomes more than ownership, personalization—not one-size-fits-all—, and improvement over the status quo. For these reasons, companies must learn to adapt and accommodate their customers’ ever-changing predilections.
While expectations from customers are high, the yields for companies are high as well. For one, with the subscription economy, companies have a more consistent revenue flow. With guaranteed revenue, businesses can predict outcomes, develop plans and formulate better strategies. Moreover, with the membership-based business model, businesses have an opportunity to develop a deeper relationship with customers. With insights on customers’ wants and preferences, companies can work on improving their products and service.
Companies Joining the Subscription Economy Revolution
- Signal Snowboard is a snowboard subscription that lets snowboarding enthusiasts gain access to new snowboards every year for as little as $35. The subscription includes the Baldface Snowboarding experience—complete with accommodations, daily backcountry snowboarding, avalanche safety courses, and transportation to more remote locations.
- Sudsy Club offers amazing skincare regimen through handmade artisanal bath-and-body products. Deliveries are made every even month—a time when customers will receive a box of luxurious bath and body products for only $25.
- Viveport Subscriptions is the first VR technology subscription app. With access to numerous VR applications, members can trek the Everest or explore the deep of the Pacific. Launched in April 2019, the subscription app is a subsidiary of HTC. Consumers can choose from the library of more than 600+ apps and games
- The Period Store is an online shop that lets women customize their menstrual products delivered at their doorstep every month. From sponges to pads, cups to tampons, The Period Store offers a selection of products starting at $15 per month.
- Trade Coffee is a matchmaking service to help coffee lovers find their perfect match. Current members can’t help but gush about how they found their perfect brew. Matching starts at $15 with options curated from 400+ roasters all over the country.
- RushTix is proof that the membership-based business model is making its way to every industry. Rush Tix is a platform that aggregates live entertainment experience at members-only prices. Tiered-pricing starts at $19 per month. From concerts to theater plays to cultural events, RushTix curates events for its subscribers. So, members can simply pick, click and go.
- Inspirato Pass is a luxury travel subscription that lets members choose from 60,000 travel experiences for $2,500 per month, with no nightly rates, taxes or fees.
The Subscription Economy—and Beyond!
The rise of the subscription economy underscores the shift of commerce from product ownership to the creation of consumer experience. With the customer at the center of the value creation—providing convenience, customized experience, and value for money should be at the front and center of every enterprise. And based on current trends with businesses around the world, it’s safe to say that the membership-based business model of the subscription economy is on its way to gaining more traction globally.