Building businesses for the subscription generation

By Aarthi Rayapura September 15, 2016

Excerpts from a post by Richie Etwaru on CIO.com

Have you heard of the “subscription economy”? How about this phrase “every business will be a subscription business”? (That phrase was never used on the internet until it appeared in this blog.)

Two things are driving a new type of business called a subscription business: The growing preference of the younger generation to subscribe to or rent things instead of owning them, and our general disposition as a species to always have the best or latest versions of products.

You can subscribe to shave clubs, Amazon Prime or services that send you a meal a day. You can subscribe to bi-weekly deliveries of groceries, monthly deliveries of new interesting wines — even regular deliveries of socks.

Lately, I am of the feeling that I can subscribe to just about anything. Apple’s iPhone upgrade plan is “phone as a subscription.” I would subscribe to a mobile phone.

In the past, we have subscribed to magazines or professional associations. Today, I have subscriptions with a music streaming service, a shipping company, a grocery delivery company and a cool sock company. Yep, I take the sock game seriously.

Three things are key in the subscription economy: You pay a fixed price for things regardless of whether you use them or not, you entrust someone who really knows you to solve a problem you could solve for yourself, and a real product is at the center of the innovation — a product that may or may not be made by the subscription business.

The challenge of building successful subscription businesses requires three specific focus areas.

Pricing: You need to think about pricing very carefully, deeply and from a long-term perspective. Netflix almost crashed when it changed its monthly subscription fee. When customers decide to subscribe to a solution to a problem, they are likely to expect their recurring subscription fees to stay fixed, rather than accepting rising prices.

Customers: In order to deliver products and/or experiences that delight customers, you must study and know your customers extremely well. Subscription companies focus fanatically the customer, and the way that customer evolves through the journey/life cycle of the subscription/relationship.

Partnerships: When customers subscribe to your service — and entrust you to solve a problem (that they could potentially solve for themselves) — they expect you to deliver the best solution to the problem, regardless of whether you manufacture the solution or are reselling it from a partner.

Read the full article at: www.cio.com

And download Zuora’s 9 Keys to Building a Successful Subscription Business