The subscription business model continued to gain momentum throughout 2017 with a range of businesses and industries adopting it, and we are quite sure that 2018 will be an even bigger year for the subscription marketplace. So, what are the key subscription business trends to watch out for this year? Shashank Venkat examines
The world is increasingly becoming subscription-driven. Customers are quickly realising that they do not necessarily need to own every product that they use, and that subscribing to products and services is a better alternative. Businesses are recognising this shift in mindset and are tailoring their products and services accordingly. And nowhere is the shift more visible than in the media & publishing
industries where subscription offerings are rapidly becoming the de facto business model. Other industries are also now ripe for disruption with subscription-based billing models.
So, where is the subscription industry heading in 2018?
New players, new markets, new customers
– Who would have thought that Formula 1
or even Porsche
would gravitate towards a subscription-based business model? It seems that every company now wants to become a ‘Netflix’ within their own niche. In addition, a recent McKinsey survey
revealed that only 55% of online shoppers subscribe to a service, which clearly indicates that there is a lot of room for growth in the subscription marketplace. The year 2018 will undoubtedly see new players emerging across newer markets and more customers turning into subscribers.
Diversified billing models
– Netflix operates a pure-play subscription model which charges customers on a recurring basis. However, there are many businesses which gain revenues through a mix of recurring billing and one-off sales. The best example of this is e-commerce giant Amazon which has a diversified revenue stream though e-commerce, cloud services and hardware, in addition to its Amazon Prime subscription service. Businesses that aren’t yet comfortable fully embracing the subscription model can move a small part of their business to subscriptions and take advantage of the flexibility and revenue opportunities that it offers. Furthermore, established subscription businesses should also consider adding one-off product sales and usage-based products to their portfolios in order to reach new market segments and grow revenue.
More personalised experiences
- According to the McKinsey report, curation-based subscriptions tend to dominate customer preferences. This reflects the fact that subscribers are ready to pay regularly for high quality, personalised offerings. In fact, the same study said that subscribers consider personalised experiences as the most important reason to continue their subscriptions. The success of subscription boxes
is ample testimony to the fact, and we can expect more uniquely tailored subscription offerings in 2018.
IoT-powered subscription businesses
– In our 2017 subscription trends
report, we explained how the Internet of Things (IoT) will create new opportunities for subscription-based services. We continue to remain positive about IoT’s impact on subscription businesses as the industry moves beyond proof-of-concepts to actual projects in 2018. For instance, the data generated by IoT devices can be logically interpreted through machine learning to determine trends and predict results which in turn can power ‘smart’ billing solutions. Subscription models are also a great way for businesses to generate revenue from their IoT products and services.
– You may love cryptocurrencies or hate them, but you can’t ignore them. We may be jumping the gun here, but the allure of cryptocurrencies for many customers means that businesses simply cannot afford to overlook them. Of course, subscription businesses will have to get around regulatory concerns and the volatility of cryptocurrencies before fully implementing them. In fact, payment processor Stripe has already experimented with Bitcoin as a form of payment, but the company has shut down that option for now, citing the instability of Bitcoin prices. That being said, with the launch of services such as Coinbase Commerce
, perhaps the day is not too far away when we see cryptocurrency-based subscription billing.
What are some of the trends that you think that will play out in the subscription space in 2018? Do let us know in the comments section below.
We publish the subscription business trends every year to help subscription-based businesses understand the market evolution and maximise the opportunities available to them. Learn how the Cerillion Skyline subscription billing platform can prime you for the subscription revolution in 2018.