Subscription or ‘<Something> as a service’ is the buzzword in the digital world. While the subscription business is not new to humanity, we are seeing a rapid transformation that many businesses are adapting to this model.
With so many players in the market, ‘Customer Stickiness’ is the key here. The industry is swiftly moving from selling durable goods to subscription models.
So what do we gain or lose here?
Leasing models trade-off ownership with accessibility. This option makes us think even more deeply about what exactly we want. Taking fitness as an example, do I want to be fit or do I want to be the owner of Threadmill?
Financially, this approach helps both the consumer and seller in terms of cash flow. As a customer, I don’t need to make an initial bulk sum investment to get a feeling of the product or service. On the business side, I get revenue on a regular basis (Business Term: Monthly Recurring Revenue). This helps businesses to have predictable revenue. As a customer, I also have the option to opt-out of the service should I not be happy with it. This is again a win-win model for both parties thanks to the frequent feedback loop on product usage and decreased lock-in for the customer.
On the negative side, ‘Subscription Fatigue’ is a common concern wherein consumers have a feeling of continuously losing money without making use of all the features that service offers. Also, some business makes the ‘exit’ very difficult by using cheap tactics. This model is also not cheap in the longer term. There is again a trade-off with better service and cost.
In a nutshell, every business is trying to build a strong and sustaining relationship with their consumers. This is inevitable in the highly competitive ‘red-ocean’ markets. Subscription models solve this problem and help businesses to give more agility by making their decision from irreversible to reversible.