The subscription business model is nothing new. In fact, it’s been around for decades. Think about it. When you were a kid, your parents probably had a newspaper subscription so that they could get the paper every day and stay abreast of current news. And how long have you had that unused gym membership that just charges you every month as you pack on the kgs? (no judgement here).
We’re all part of the subscription lifestyle in some way. According to the Zuora Subscription Economy Index, subscriptions command a USD14 trillion market capitalisation. Information technology, and media and communication services make up the bulk of this number.
From meal kits that turn you into a gourmet chef overnight to your favourite streaming service, subscriptions have become the ultimate life hack. It’s not just about convenience (although, let’s be real, that’s a big part of it). It’s about curating a lifestyle that fits you like a perfectly tailored suit.
The Evolution
Technological advancements and changes in consumer behaviour have developed the subscription model into the behemoth we know and love today. We first saw the subscription model take flight in print media and news through newspapers and magazines – In fact, publishers and authors have been doing this since the 1600s.
However, the modern subscription business as we know it today really took flight in the mid ‘90s, alongside modern computing. This is the time period where iconic brands like Netflix and Amazon were first established. Although back then, Amazon just sold books, and Netflix was a movie rental business. They’d send you DVDs by mail. Real, actual DVDs, to your real, actual postbox.
Digital content subscriptions began to rise in the early- to late-2000s. Streaming platforms like Netflix, Spotify, and Showmax jumped on the subscription bandwagon, bringing unlimited mainstream entertainment into consumers homes for just a small monthly fee.
In the mid-2000s, the software industry also began adopting subscription models as an alternative to one-time purchase licences, leading to the proliferation of the Software-as-a-Service (SaaS) industry that is dominating today. Think Adobe, Zoom, Microsoft, and Google.
We’re now in the fourth phase, where multiple industries are adapting the model to fit their needs. We’ve seen everything from fashion and beauty, to food delivery subscriptions grow rapidly in popularity.
The Good, The Bad
For customers, subscriptions provide a wide pool of resources and eliminate the need for repeat purchases. They’re also often more cost-effective over the long-term. Think about it. With your Netflix subscription, you’ve probably saved thousands on cinema tickets, as well as transport costs to get there, and the price of snacks.
Another great benefit is that subscriptions encourage a shift from ownership to access. In this fast-paced world where new and improved products are constantly dropping, this shift holds even more weight with consumers who always want the latest product, without the strings that hold them back. This is one of our unique selling points, as Rentoza customers can upgrade or downgrade their subscription at any point, completely penalty-free.
As data analytics continue to advance, personalisation will only get better and create tailor-made experiences for consumers the world over.
And it’s not only consumers that benefit from subscriptions. Businesses following the subscription model can enjoy predictable revenue and a stable income, as well as enhanced customer retention as subscriptions by nature encourage long-term relationships. This also allows businesses to collect valuable data on consumption patterns that can feed into brand strategies going forward. This is why Rentoza has a B2B-focused offering that enables businesses to succeed without having to worry as much about upfront costs.
On the flip side, subscription businesses may experience customer churn once their subscription comes to an end. Consumers may also face subscription fatigue at the sheer amount of subscriptions available to them on the market. And, of course, as more and more businesses adopt this model, the market will naturally become more saturated, creating more competition which in turn can raise prices.
The Future
The subscription model has revolutionised the concept of ownership for consumers, while completely changing the way companies interact with consumers.
There’s no slowing down in the subscription economy. Subscriptions offer a multitude of economic benefits for both businesses and consumers, while also feeding into practical needs. As the subscription economy continues to advance, businesses must invest in relevant tools and technologies to maintain and enhance this model effectively.
