Subscription models as a strategy for the future
t3n from April 15, 2020: It is the great hour of the subscription models:
There is hardly an industry that is not currently trying to offer its goods and services on a subscription basis.
Here you can find out what this is all about and what you need to consider when entering the subscription business.
As is so often the case, the USA is the pioneer – subscription services there have grown by more than 100 percent in the last five years, but so-called subscription models are also becoming increasingly popular in Germany. The idea behind it is not new.
As early as the 17th century, book publishers tried to determine the size of their circulation with permanent contracts and advance sales. In the mid-1990s, however, things really took off with the subscription models .
At that time, the telecommunications industry brought the first offers with intelligent tariffs onto the market. Suddenly it was possible for customers to pay a certain amount for a certain number of free units each month instead of having to pay for every minute of calls and text messages.
Being able to use instead of wanting to have A win-win situation
Over the past 20 years, models of this type have continuously evolved.
Telecommunications providers are no longer the only lure with intelligent tariffs – we can now also listen to music (Spotify and Deezer), watch films and series (Netflix and Amazon Prime), and even shop (Hellofresh and Foodist) with a subscription .
This concept has many advantages – on both sides. It is often cheaper for consumers to subscribe to products or services instead of actually buying them.
At the same time, they benefit from a much larger selection and are super flexible. Many subscription providers also offer discounted or even free trial periods. And why are they doing all this?
Because providers also benefit from subscription customers. Once a customer has taken out a subscription, they initially remain loyal to the company.
This saves money and time when acquiring customers and prevents them from going to the competition. Long-term customer relationships also enable the collection of valuable customer data.
Thanks to fixed membership numbers, entrepreneurs have much better cost control than would be the case with spontaneous purchases, so they can plan much better and budget more effectively.
Do you want to have the Porsche in the garage or be able to drive it?
In the meantime, people have gotten used to no longer owning certain things, but only being able to use them.
And if you can listen to music as a subscription, what speaks against driving a car with a comparable model?
What may sound absurd to many at first is already reality. And especially plausible for the young target group that grew up with subscription models. More and more automobile manufacturers are currently experimenting with subscription models that allow users to rent vehicles for a fixed monthly fee.
In the USA, for example, there is the “Porsche Passport” program: for an amount of between 2,000 and 3,000 US dollars a month, users can grab a car via the app – and depending on the tariff, they can even change the model every day.
If you are going to your holiday home for the weekend, book the Cayenne with enough storage space – the 911 in the Carrera Cabriolet version is used for the short trip to the lake after work. In Germany, too, there are already similar programs from Porsche, Mercedes, BMW, Volvo and other manufacturers.
Financing, leasing and subscription what are the differences?
But how do these subscription models work in contrast to classic leasing or financing?
This is explained below using the example of a car, but can of course be applied to various products or services that are available on a subscription basis.
Anyone who cannot put the money for the car purchase directly on the table in cash can finance their car. Basically, financing involves taking out a loan from a bank in order to be able to pay the vehicle price directly to the dealer.
The money is then repaid to the lender in monthly installments. Advantage here: At the end of the term, you actually own the car. Disadvantages are sometimes high interest rates and little flexibility.
Leasing is a kind of long-term car rental, monthly installments are also paid here, but to the car dealership itself – usually over a period of two or three years.
At the end of the leasing period, you can decide whether you want to return the car and lease a new one if necessary, or whether you want to keep the car – then the contributions already paid will be taken into account.
Since owning a car is becoming less and less important for many people, especially young people, car subscription models are increasingly coming onto the market. They are sometimes also referred to as all-inclusive leasing and are characterized by their enormous flexibility and all-encompassing service.
The user usually pays a fairly high monthly fee, but doesn’t have to worry about anything in return – everything is already covered by the subscription, both financially and organizationally.
If the car has to be repaired, for example, a phone call to the provider is all it takes. All insurance and taxes are already included in the monthly fee.
The customer actually only has to refuel himself – and depending on the tariff, he can opt for a different model on a daily, weekly or monthly basis.
A subscription is not always the same
But there are not only differences between subscriptions and leases.
Because almost every good can now be subscribed to, different subscription models have of course also developed. From rental subscriptions like with cars to beauty or food boxes to club memberships like with Netflix or software providers.
Incidentally, SaaS (Software-as-a-Service) is also a hot buzzword these days. Since the triumph of the cloud, more and more software providers have been selling their products remotely and on a subscription basis (known examples are Microsoft Office 365 and Adobe Creative Cloud).
Companies particularly benefit here from the option of subscribing to SaaS offerings as needed and being able to install them on their own devices instead of having to provide expensive software licenses and the necessary hardware.
Other advantages: updates to the software are automatically included in the valid subscription, and if there is a problem somewhere, there are support services that will take care of the matter.
So it turns out that the subscription model is not new , but it has developed rapidly in recent years. Admittedly, the subscription economy is a bit “old wine in new bottles”, but “awesome shit” still applies, with countless advantages for customers and companies.
If you want to delve deeper into this topic or if you are an entrepreneur thinking about selling your own subscription offers, you should definitely take a look at the free white paper from nexnet.
