This article was originally written and published by Le Figaro.
Subscription, the latest key business component
Brands are offering more and more subscription choices. Consumers like the idea of paying for usage rather than ownership.
What are the common factors shared by Royal Canin dog food, Nespresso capsules, flowers from Aquarelle.com and the Volvo Polestar car? Not a lot, at first glance. But in fact, all these products will soon be available on a subscription basis. So for instance, the Nestle subsidiary will give its customers the option of purchasing a coffee machine for one euro, and having an unlimited number of capsules delivered each month (for 19 or 29 euros a month). “We’re adapting to our customers’ needs, by making life easier for them”, explains Nathalie Gonzalez, marketing manager for Nespresso. “It’s a way of winning new customers, for whom the price of a machine might be an obstacle, and it’s a different way for others to purchase”.
“We are in a world of me and of premium products. Consumers like to know that their views count, that they can improve the end service”, Laurent Thoumime, executive director at Accenture.
Subscription has never aroused so much interest among brands as among retailers. It has become a new standard for the entertainment industry, thanks to Netflix and Spotify. In the transport sector, Velib’ and Autolib’ are flourishing. Amazon set the tone with its Prime programme which guarantees subscribers next-day delivery and exclusive content (cloud storage of photos, unlimited video, etc.). With the Dash button, to press when washing your hair or cleaning your teeth, e-merchants have driven the process even further. Boxes have popularised this concept by giving it a pleasure dimension.
“We believe this business model will spread to all sectors of the economy, with the power of technology (smartphones, cloud, Internet of Things, etc.)”, comments Tien Tzuo, founder of Zuora, which is supporting companies in developing their subscription platforms. “These are often sector-disrupting start-ups, forming traditional businesses to transform themselves faster”.
This phenomenon is the result of a sea-change in consumer aspirations. Busier, more urbanised, more connected lives means that consumers are trying to escape from the limitations of purchasing, including product maintenance or obsolescence. So Maison de la Literie, the bedding company, has just launched the first lease package with option to buy for…mattresses. The usage economy has overtaken that of ownership, opening the way to collaborative consumption as well. What’s the point of buying a drill to use it twice in your life, when you can hire it on Allovoisins, the local sharing site? Why burden yourself with a car, in the age of Uber or BlaBlaCar? With its unlimited TGV Max package (79 euros a month), the SNCF – which has won 90,000 customers in nine months – wanted to give young people a more economical response, which was also more in step with the advent of low-cost companies, car-sharing and Macron cars.
“Among well-to-do classes, it is ethical or environmental motives which prevail,” notes Laurence Allard, senior lecturer at Paris III university. “Subscription gives preference to items which will not end up in the bin, and is an anti-bling form of consumption”. So Monpotager.com offers city-dwellers the chance to own a virtual plot of land and then enjoy the harvest from it. With its start-up Lokéo, Boulanger is considering subscription for household electricals and multi-media goods. “We offer peace of mind,” explains Stéphane Proudhomme, brand manager at Lokéo. “Gone are the days of finding yourself with a washing machine that no longer meets your needs. You can now hand it over, replace it, and know that it will have a second life”.
Young people are driving these changes. Around three-quarters of them are attracted by subscription packages targeted on fashion, and 71% by automatic resupply plans, according to a survey by the marketing company Accenture. “We are in a world of me and of premium products,” according to Laurent Thoumime, executive director at Accenture. “Consumers like to know that their views count, that they can improve the end service but also that their values and their tastes are taken into account in the recommendations they receive”. Netflix understands this perfectly, in its selection of films and series adapted to suit the user’s profile.
It’s true that subscription is criticised by some people as a form of subjection, maintaining the illusion that the consumer is in control. “With this type of formula, we move from a basic economic model with a price per litre or per kilo, to a services system, simpler, but also less tangible, less real, which blurs the consumer’s view of the true price, and also enslaves”, believes Pascale Hebel, director of the Crédoc business and consumer research centre.
“We’re adapting to our customers’ needs, by making life easier for them”, Nathalie Gonzalez, marketing manager for Nespresso.
And that’s just the point for brands and retailers, who wish to maintain closer and more regular contact before, during and after purchase, with their well-informed and thus more demanding consumers, less likely to remain loyal to familiar brands. By launching their subscription programme, brands are breaking their dependency on retailers to form direct links to their customers. Royal Canin has tested the subscription process in Spain on pet food supplied on prescription by vets, as a way of moving closer to its end customer. The brand can now monitor the animals being treated, and offer complementary products to the owners. “This allows us to design more suitable products, such as larger packs or tailored dietary programmes, and increase the average spend,” explains Cécile Coutens, marketing director for Royal Canin. “We can therefore focus our product package and improve our position in the health and well-being sector”.
Subscription renders obsolete the retailers’ loyalty programmes based only on price. They are a way of entering the daily life of consumers. “With Fnac+ and Darty+, we can bring our customers together around a very well-supplied on-line services platform,” considers Alexandre Viros, head of e-commerce at Fnac Darty. “Subscription can therefore be the door into services which encourage purchase and use of our products”. It could also include cultural content, insurance and credit along the way.
Could it just be the winning formula to hold onto customers? “One thing is certain, retail can no longer be just a simple sales relationship, and our business cannot be reduced to stock control and protecting our margins. We will increasingly have to think in terms of value to customers”, adds Alexandre Viros. “The challenge involves being able to do business everywhere,” comments Laurent Thoumime. “Subscription might be one piece in the jigsaw, alongside other channels such as personal assistants, collection lockers or delivery in car boots”.
In the data wars, subscription is a way of collecting valuable information, so as to target customer expectations more effectively. Faced the power of GAFA, it gives brands and retailers, as well as hotel groups, property companies or energy companies a winning card to play.