In the business economy, certain developments stand out as tipping points. Automaker General Motors’ (GM) launch of a subscription service for luxury Cadillac vehicles marks one of these moments: When cars become a monthly service, we can now safely say we are in the subscription era.
For the past few years, the subscription economy — where consumers and businesses pay for a service monthly that was once bought one transaction at a time — has grown at a frantic pace. The average American consumer started with subscriptions like Netflix and Amazon Prime, before the market expanded to include everything from buying razors (Harry’s or Dollar Shaving Club) to buying underwear (MeUndies) and beauty products (Birchbox).
Businesses too have increasingly subscribed to services for everything from software to build apps (Microsoft Azure) to industrial machines being sold as services rather than as assets. Now, you can buy an eye-popping subscription to Cadillac’s 10 luxury vehicles — from the sporty ATS Coupe to an Escalade ESV that can cost more than $100,000. For $1,500 a month, subscribers can swap cars up to 18 times a year without having to worry about such things as repairs or boredom.
This is no fad — it’s the beginning of what promises to be a revolution in how customers (both consumers and businesses) use products and services. Cadillac’s move is not the culmination of this cycle, it’s the start of the coming revolution of how we consume and benefit from products.
In this new economy, companies will still have to focus on the quality of their products and services as well as such things as cost, features and customer service. But new factors will determine which businesses thrive and drive value in this exploding trend.
One differentiating factor that will be especially important in the subscription economy is the customization of features and billing options down to the individual customer.
Historically, subscribers have been offered limited pricing plans and options. Netflix (NFLX), for example, has three streaming plans based on the subscribers’ number of devices. Now, new options are popping up. Time Warner’s (TWX) HBO unit, for example, was once only offered as part of a cable TV bundle of stations but now is available as a stand-alone HBO Go product, costing $15 per month, that can be streamed across any device, including a TV.
Such fracturing is just beginning and the companies that will succeed are those that make a variety of offers based on price and service level that will appeal to different demographics. To me as a chief executive of a software-as-a-service company in Boulder, Colorado, the idea of a Cadillac subscription to a variety of vehicles sounds appealing.
But, Cadillac’s ability to sign and retain me as a subscriber will depend upon its ability to do two things: customizing my experience and pricing the service in a way that works for me.
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