Top Five Subscription Business Trends for 2020

Top Five Subscription Business Trends for 2020
As we usher in a new decade for the subscription industry, there is no doubt that businesses in the space will find more ways to engage customers, create new revenue streams and innovate with unique approaches. Shashank Venkat looks into the trends that mark the beginnings of a period where the subscription model is poised to become the default for most businesses.

What a ten years it has been for the subscription industry! From being the sole preserve of startups and forward-thinking businesses at the beginning of the decade, the subscription model has now acquired pride of place among leading tech giants including Apple, Amazon and Google, all of which have launched subscription services. As 2020 begins, the industry continues to see large-scale innovation and creates new benchmarks for customer experience.

Here are the top five subscription business trends we expect to play out in 2020:

The great subscription bundling – It is surprising that more companies are not emulating Amazon Prime’s super successful bundling strategy. Free and fast deliveries, lower costs, exclusive offers, free access to music streaming, video streaming and counting…Amazon has built an enviable line of products and services for its Prime subscription bundle. We expect bundling to be a huge industry trend in 2020. There are already reports about Apple launching a subscription bundle combining its new services, and even Google is well placed to bundle its seemingly disparate services such a Google Play Pass and YouTube Premium. Bundling is a great way to reduce subscription fatigue and give customers greater access to services at a lower cost. However, businesses should think about bundling in two different ways:
  • Homegrown bundles created by combining their own products and services in one package, similar to the Apple or Amazon model.
  • Cross-platform plays which combine their own services with other popular services from partners. For example, several telcos already offer bundles that include Spotify Premium with their traditional mobile plan.
The possibilities for bundling are truly endless!

Personalisation continues to evolve – Personalisation never goes out of vogue in the subscription industry. Look at any successful subscription giant such as Netflix, Amazon or Spotify. What do they have in common? A smooth subscription billing experience, technological smarts, fantastic products and/or services and, of course, personalisation to drive customer engagement. Be it through Spotify Wrapped or Netflix offering customised content suggestions, personalisation has been critical to the success of these platforms. Retailers have also been able to use personalisation as a key subscription growth strategy helping to increase revenue predictability and reduce subscriber churn. Personalisation shows customers that businesses are paying attention to their needs and it goes a long way in establishing customer loyalty. Subscription businesses will continue to enhance personalisation through one-to-one offers for loyal customers, engage with customers more closely by tracking their past correspondence and purchase history, and give customers more control over their communication preferences.

Geo-specific offers – Global subscription companies will be increasingly sensitive to the local needs of their customers and ditch the traditional one-size-fits-all approach. A great example is the way Netflix is now positioning itself in different markets. For instance, the SVOD giant increased prices and removed free trials for its UK customers in 2019. However, the company has taken a markedly different approach in India by launching a low-cost mobile-only plan for just ₹199 ($3) per month. It is also testing newer long-term plans that offer significant discounts. A similar approach is being taken by The Washington Post and YouTube who are offering specific plans tailored to their Indian audience. Expect more companies to go down this route as they sharpen their offerings for different markets in 2020.

‘Smart’ audio subscriptions become the new normal – Music streaming and podcasts have captured the mainstream in the past few years, but smart speakers like Amazon Echo will take the experience to the next level. Businesses creating audio content will find new ways to monetise their offerings though smart speakers. For instance, Amazon has already introduced a subscription-based model on Alexa Skills centred around education in India. The tech giant wants to use the increasing demand for education-based content to develop a new revenue channel in the country. This is a new market ripe for the taking and businesses taking the plunge will definitely benefit through increased visibility for this innovative offering and the presence of fewer competitors.

Pay according to use – This may well become another important strategy to improve subscription experiences and reduce subscription fatigue. A consumer’s typical subscription portfolio can include a couple of video streaming services, a music streaming service, a newspaper or magazine subscription service and a few other niche offerings. What if these subscription companies started charging you less if you consumed content below a certain threshold? For example, if Spotify charged only half the regular subscription price for their Premium plan ($4.99 instead of $9.99) for up to four hours of audio per month? Anything above the threshold would then be automatically charged the regular price. Cloud companies such as Amazon Web Services have been practising usage-based charging in the B2B space for some time and B2C subscription companies can offer something similar, albeit less complex from a billing standpoint, by offering two plans – a cheaper entry level plan for low use accounts and a regular plan for those consuming content above a set threshold.  Similar to the freemium model, this can be used to attract more subscribers to take the plunge and sign-up, but without giving anything away for free.

Is your subscription business ready for the challenges and opportunities these trends will bring? Try out our subscription billing platform to see how Cerillion can help you prepare for subscription success.