Mumbrella reports on the growing subscription economy.
The subscription economy, the benchmark sales model for magazines and newspapers for many years, is now being embraced by brands as they attempt to shift consumers from single purchases to a recurring revenue model.
David Gee, chief marketing officer for Zuora, which builds platforms on which brands can run a subscription business, says the model which has been adopted successfully by companies such as Adobe and Salesforce, was increasingly being seen by mainstream, consumer-focused businesses as a better way to build lifelong engagement with customers.
“You just have to look at the Netflix example, it is slowly becoming more mainstream,” Gee told Mumbrella.
“There are hundreds and thousands of medium and large enterprises today who build product and shift products and over time some, and we hope many, will make a transition from trying to build and sell product to monetising what they sell as a subscription.”
He said that many companies now starting up were being designed to operate as subscription-based businesses.
Companies such as Dollar Shave Club had shown a new way to do business was possible.
The software as service industry was leading the way because of the ease of delivering software under a subscription model, with companies such as Microsoft, Apple and Netflix showing the way.
John Kearney, managing director – Asia Pacific, at Zuora, said that publishers such as Fairfax were leading the charge in Australia along with software companies, but the shift to consumer goods was already beginning.
“The area that’s really expanding in Australia and New Zealand is SaaS companies in general,” Kearney said.
“Essentially nearly any one of these companies that could be doing north of $10m in recurring revenue hit a wall where the need to put more maturity around the subscription services that they offer. In conjunction with that is the start-ups.”
He said the lesson from companies moving to a subscription model was getting the package right.
“Big business has to be on top of pricing and packaging as a strategy and as a series of tactics as well to secure market share.
“Learning from the media industry, from Fairfax and from many others around the world, teaches us that simplicity is going to be key, particularly for business to consumer.”
Gee said companies needed to focus on what they did well, rather than allowing themselves to get tied up developing back end systems such as subscription services.
“We have auto manufacturers, physical box delivery folks. There is a start-up airline in California called Surf Air, which, for a monthly fee is all you can eat usage of their service up and down the west coast of the United States – it’s subscription-based transportation.”