The Subscription Economy is Taking Over
The subscription economy is moving in a myriad of different directions, going well beyond music and TV/movie streaming services. In fact, according to one estimate, the subscription economy has grown over 435% in nine years.
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The Subscription Economy is Taking Over
In an earlier era, the oil baron J. Paul Getty famously said, “If it appreciates, buy it. If it depreciates, lease it.” If he was around today, he might amend that to “If it depreciates, subscribe to it.”
The subscription economy is moving in a myriad of different directions, going well beyond music and TV/movie streaming services. In fact, according to one estimate, the subscription economy has grown over 435% in nine years.1
In a recent survey, 78% of all surveyed international adults currently had a subscription to one or more services; this is up from 71% in 2018. Fully three-quarters of surveyed participants believe that people will continue to subscribe to more services, choosing to own less physical stuff.2
The so-called “end of ownership” is happening because global consumers find that a subscription simplifies their lives, gives them a wider variety of choices and costs them less than buying a physical item outright. A subscription also has the advantage of providing consumers with immediate access to the latest upgrades for the products and services they use. And, while it may not be determinative to their decision, they do believe that subscriptions are more environmentally sustainable.
Of course, TV/movies and music are the subscription heavyweights, but other winners are emerging, including meal delivery services, software, cloud storage services, cars (yes, cars!), gym memberships, razor blades and clothes.
What Makes a Subscription Economy Different?
The subscription economy revolves around access, not ownership. It’s concerned with “product experience” so it becomes more centered on personalization rather than mass production. It requires automating updates and improvements, as well as building a relationship with the consumer in ways that were unavailable in the “buy-and-use” ownership model.
Zuora, a subscription management enterprise software company, describes this shift as the end of hit products, big blitz launches, selling products, unit margins and obsolete systems. Instead, it’s seen as the beginning of never-ending products, ongoing brand experience, selling outcomes, customer lifetime value and innovation systems.
Not surprisingly, this trend is being led by younger generations. As these demographics enter their highest consuming years, expect the subscription model growth trend to accelerate. Businesses that fail to respond with subscription-based offerings will likely be unable to compete in the future.
Sources:
- https://whatsnewinpublishing.com/the-subscription-economy-has-grown-over-435-in-9-years-and-the-uptick-is-expected-to-continue/
- http://info.zuora.com/rs/602-QGZ-447/images/The%20End%20of%20Ownership%202020.pdf
Please reference disclosures: https://blog-dev.americanportfolios.com/disclosures/
