BMW recently announced that to get warm in your car (by way of heated seats), you’d need to pay a monthly subscription for that.
What are subscription services and how big a part of our future are they?
According to Juniper Research, the global market value of the subscription economy will grow to US$275 billion in 2022, rising from US$224 billion in 2021.
From Spongebob merch delivered on a monthly basis to spices to razors, it’s the literal long-tail at work – someone somewhere is willing to pay for something to be shipped every month.
Beyond the subscription boxes, some of the more common ones are content or streaming services such as your Netflix. This could be anything from music to audiobooks to online course etc as long as it can be accessed via a channel or platform anytime, anywhere. Most will also take a page from Netflix’s playbook by providing personalized recommendations to keep subscribers engaged.
Next you have technology as a service. This encompasses everything from software, to the platforms they are built on and even where they are hosted. For most of us, we deal mostly with SaaS providers such as Microsoft’s Office 365, Adobe’s Creative Cloud and the like.
Once upon a time, it would have cost thousands of ringgit to buy a single license of Adobe’s Photoshop for example. Now for less than RM50 a month you get Adobe Photoshop as well as Adobe Lightroom across your devices and cloud storage.
Lastly, you have the products with added subscription services. Your iCloud or Google Drive storage is an example of this. Subscribe to expand your device’s ability. BMW’s heated seats are another example of this.
So why should you consider subscription as a business model?
Firstly, it helps with pricing, especially when your product or service commands a premium.
By moving away from outright sale of the product to a monthly subscription, it not only lowers the entry point, but allows more people to use your service. At the very least, more people will sign-up for the experience.
The majority of subscription businesses also offer different tiers in their subscription model – from free all the way to full-blown-everything-and-the-kitchen-sink thrown in. This is designed to allow people to get people comfortable with the product first.
Experience is key in any subscription business. You cannot just stop engaging once they have given you their credit card details and move on to converting the next person who comes along.
How you engage or guide a person in experiencing your brand or product is key to retaining his monthly subscription. Example – I’ve read and watched about how useful Lightroom is to me as a photographer, so when I’ve taken the plunge and paid my hard-earned dollars for a sub, ease me into it.
Granted with software such as Lightroom there are thousands of resources out there, but that doesn’t give you the right to not treat me special. On the opposite end of the spectrum, Da Vinci Resolve is a popular video editor competing with Adobe Premiere and used by amateurs and professionals alike. There’s no welcome tutorial but they give a free version away and users have to rely on tutorials from You Tube and the web.
Experience works both ways. It is not only skewed towards the customer, but also to your business. It could be challenging for businesses to innovate fast enough, but by monitoring what users are saying, you can then tweak your products and services accordingly for broader appeal. Think of it as a never-ending focus group on steroids. If you are just starting out and have adopted a freemium model, user feedback would be the best way for you to identify any shortcomings in your product or service.
On the flipside of things, a bad experience could also lose you customers. Poor product on-boarding and unresponsive customer support can lose you your loyal subscribers. Companies have even tried to make it hard for people to unsubscribe to services – forcing subscribers to call in to unsubscribe for example, but this has actually caused subscription numbers to go down. Rather than telling their friends to try your offering, people tell their friends about how hard it is to unsubscribe causing people to not even want to try in the first place.
It may seem insane that BMW is offering heated car-seats subscriptions to tropical Malaysia but could this be a ploy for people and news outlets to then explore what else could be available as a subscription from the German automaker? Who knows, you might be able to book your next hotel stay from them.
By Afif Azman, Teneo Innovation Lead
