Changing consumption habits are forcing enterprises to rethink their business model

In today’s society, user needs are being fulfilled by services, rather than one-off purchases.

Once people get a taste of what it is like to stream videos over buying physical DVDs, use Zipcar rather than buying a car, or store business files with Box as opposed to on their own server, their lives work so simply that they’ll never look back. Gradually, we are all becoming a part of a ‘subscription economy,’ expecting subscriptions for every single purpose.

A recent survey of 293 business executives in the US, UK and Australia, commissioned by Zuora and conducted by the Economist Intelligence Unit, found that four out of every five businesses are currently seeing changes in how their customers prefer to access their services. It’s a trend that is impacting every industry and one that businesses have become very aware of.

>See also: Survey heralds cloud billing as catalyst of the subscription revolution

To provide the subscription experience their customers demand, organisations are reacting by reinventing themselves. 51% are integrating new pricing and delivery models such as subscriptions, sharing, and rental goods and services. Of those, subscription-based models have been most widely adopted with 40% of these companies implementing subscription services as part of their core business.

Music fans who want access to millions of songs from any device without purchasing and downloading them stream with Spotify. News junkies who want to read only their favourite newspaper columns become a News Corp member and compile their bespoke Times newsfeed. And healthy eaters who don’t have the time to go out and buy snacks each day let Graze deliver them to their doorstep.

For customers, it’s about accessing the services they want, in the way that they want to receive them. Every customer is unique and has evolving needs, so businesses that still try to sell one-size-fits-all packages that lock customers into long-term contracts will be left in the cold.

Customers appreciate the flexibility with which they can tap in and out of their services when required, and the associated convenience of such an “I-get-it-now” experience. They simply subscribe to a service that is tailored perfectly to their needs and have the added benefit of receiving that service on a regular basis, adjusting it when necessary.

For businesses, it’s about customer relationships – subscription services provide them with the opportunity to better understand their customers and develop longer-lasting and more meaningful relationships. Long relationships in return drive new, more predictable revenue streams, a sharper competitive edge and a stronger business foundation. 12% of organisations say subscription models already represent more than half of their revenue, a number that is expected to grow rapidly, as 84% anticipate that this share of revenue will increase over the next two years.

Technology is what makes this transformation to a subscription business model possible. Every business has got cloud on its agenda, and more employees use their phone and tablet to drive business processes from anywhere. And because networks are always on, they can connect, consume and drive 24/7. This technology is what's transforming everything into a service, from software to digital media to the Internet of Things, making it available at our fingertips at any time.

However, one of the greatest challenges in moving to a subscription business model is centred on the legacy systems businesses once ran on. These must be re-thought if organisations want to create a subscription experience for the consumer that has the ability to reinvent an industry. What is the system that allows businesses to do that?

Is it ERP? No, because ERP was built to track products that can be put on a pallet – rather than services which are consumed over time. In the new subscription economy, where services are being consumed on a pay-as-you-go basis, the ERP model is dying out.

Is it CRM? Not entirely, because CRM doesn’t provide businesses with the flexibility to price and package their offers across different customer touch points. It’s insufficient to reinvent a business.

Instead, CRM has to be paired with a relationship business management (RBM) system. RBM is an emerging class of software focused on building, managing and optimising the on-going customer relationships that are the lifeblood of a subscription business. They provide the commerce capabilities to craft a subscription journey and create a subscription experience.

>See also: Zuora

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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