Use of the subscription business model is at an all-time high. With the rise of the digital economy, more and more service providers are exploring innovative pricing mechanisms to differentiate themselves from the competition. So, what are the trends that will manifest themselves in the subscription marketplace? Shashank Venkat offers some thoughts…
We have seen an explosion of companies adopting subscription-based business models. And why not? Flexibility, transparency, scalability and dynamic pricing structures are a win-win for both customers and businesses. With subscription-based businesses poised for huge growth in the future, more exciting times lie ahead for players in this space.
So, what are the key subscription business trends to watch out for?
1. The subscription-first mindset
– Whilst the subscription model has become the default for new digital startups, most established businesses have until now only dabbled with subscriptions for new product lines. However, the recent subscription success for companies such as Adobe
, points to more established businesses shifting to a subscription-first strategy as well. And with increasing competition, expect more innovation around pricing models as businesses explore exciting ways to tap into the subscription revolution.
2. More service companies will adopt subscription-based business models
– It is often easier to understand software product companies fuelling their growth with subscription models. But this may just be the year when service businesses like marketing and advertising agencies well and truly take the plunge. While this may mean an initial overhaul in terms of business processes, they will stand to gain in the long term through predictable revenues, business stability and higher customer lifetime value. In the future, many more agencies might follow the model of companies like Youth Noise
which offer content and design services respectively.
3. Newer industries will test the waters
– If luxury jets
and high-end cars were offered as subscription services last year, will we now see other traditional industries adopting subscription-based services as part of their digital transformations? For instance, healthcare, agriculture and legal services remain largely untapped. Maybe the next big subscription ideas will come in these markets?
4. Possible mergers and acquisitions
– With subscriptions moving from niche to the mainstream, the market is ripe for mergers and acquisitions as businesses look to acquire new technology and market share. Unilever’s acquisition of Dollar Shave Club
is just one example of the kind of deals that may be done.
5. Value-added subscriptions
– Predictive analytics and other new digital technologies such as Artificial Intelligence can help businesses offer more tailored offerings and greater value in their subscriptions. For instance, many businesses are starting to use IBM Watson
to gain business insights and offer value-added products and services, and a growing number of e-commerce companies are adopting AI-based recommender systems
to dramatically improve the shopper experience. Look out for other similar partnerships as companies aim to offer a more wholesome, engaging experience to their customers.
6. IoT will reach the next level
– The Internet of Things (IoT)
surely holds immense potential for subscription-based business models. In fact, it stands to completely transform industries and create opportunities for innovative new subscription services based on the data generated from IoT-enabled devices. Whether IoT will come into its own this year remains to be seen, but there is no doubt that larger strides in this domain will be taken.