Subscription Economics: The Age of the Subscriber Consumer

Dry cleaners, video games, media, personal care products, gyms, health services, pet products, cars … There are more and more products and services that we can enjoy in exchange for a flat fee , a model of business that is completely changing the market and that according to experts has come to stay.

Just take a look at the numbers: according to the latest index of the subscription economy of Zuora, the multi-million dollar software company, since 2012 the annual revenues of companies with pay-per-subscription models grew by 435%. What has happened so that this revolution has occurred in the market and now we have a Netflix or a similar platform for everything? According to experts, all due to a change in mentality imposed by Gen Y .

As Neus Soler, tutor of the degree in Marketing and Market Research at the Open University of Catalonia (UOC) and member of the external council of experts of the UOC’s university master’s degree in Digital Marketing, points out, ” millennials prioritize enjoying themselves over owning, and they value their time very much.

That is why the subscription is the ideal model “, he points out, and explains that, through it, users can enjoy a product that they might not be able to own, or that they could have but with great effort, with the advantage that They are going to become obsolete: domestic economies are not usually able to keep up with technological advances, so once the product is acquired, it will become obsolete in a relatively short time. This generation greatly values ​​free time, and prefers not to have to dedicate it to tasks such as shopping, “he says.

Spain has not been left out of this trend. An analysis prepared by the company specialized in monetization and mobile payment technology Telecoming affirms that the subscription economy will invoice this year in Spain 3,170 million euros, which is 28% more than the previous year , figures that place it between the European countries with the highest turnover through this type of income, only behind Germany, the United Kingdom and France.

And although millennials were the first to sign up for this trend, the reality is that it is already being adopted by different generations , even those over 65, for whom shopping over the internet is no longer exceptional: according to a study from KPMG, in Spain 36% of consumers over 65 usually buy online . “Our consumption habits are evolving. Now we value the experience of the here and now, and the opportunity to renew it, over acquiring,” says Silvia Martínez, professor of Information and Communication Sciences Studies and director of the master’s degree University of Social Media: Management and Strategy of the UOC, who affirms that, althoughthe pandemic has not been the cause of this change, it has helped to consolidate the model .

The reason is that we have had to adapt our habits to the new context, and that has led to the fact that a practice that already has a history of years “has been introduced in different sectors and works as long as it is possible to find the added value that makes the user is willing to commit and subscribe “, indicates Martínez.

Win-win strategy
Tien Tzuo, executive director of Zuora, already predicted more than three years ago that whoever did not want to be left out of the market should change the traditional model of selling products for subscriptions. He did so in an article published in The Telegraph entitled “If you want your business to grow, join the subscription model.”

For companies, the advantages are clear: guaranteed income, knowledge of the tastes and needs of their customers , the possibility of planning production and facilities to create a bond with the customer. But what does the consumer gain? In the opinion of the experts, the list of profits for the clientele is very long.

“Personalization becomes the axis of the subscription strategy, and that implies providing added value in exchange for achieving customer loyalty,” says Silvia Martínez, who explains that this added value can range from offering an experience that was previously considered luxury for a lower price to make a selection of products by the client according to their preferences or needs or even have the opportunity to periodically renew a product or service enjoying the latest in the market. ” A unique relationship is established between brand and subscriber, who feels that they are distinguished from the normal customer and are rewarded in some way”, says the UOC professor. It doesn’t even seem like we lose too much by “not owning.”

According to Inma Rodríguez-Ardura, professor of Digital Marketing and director of the UOC’s Digital Business Research (DigiBiz) research group, consumers establish emotional ties with our possessions, whether material or immaterial. In fact, the products we buy and use can become very important objects for us, with which we can identify to such an extent that they help us to forge and shape our own identity. But you don’t have to buy them, just use them.

“The psychological feeling of owning a productit can arise both with respect to products that are legally our property and also in relation to articles that we do not really own and that we use or consume regularly, “he says, and gives as an example what happens among many users of iPhone by subscription For this reason, an article that we enjoy thanks to a subscription service “can awaken in us the same psychological feelings of attachment and ownership, and be, for us, as transcendental and valuable as an article that we truly own,” he says.

In fact, according to the Bankinter and Zuoren study, in 2019, 26% of adults, from 12 countries surveyed, had 3 or more subscriptions. On the other hand, the current scenario, where awareness about sustainability is increasingly important, influences the growing number of supporters of use and consumption over property. ” The anti- consumption trend and the collaborative economy are also in that line, it is part of the same evolution of the consumer, who goes from being an owner to being a user”, says Ana Jiménez-Zarco, professor of Economics and Business Studies and director of the UOC’s master’s degree in Digital Marketing.” Everything responds to the same discourse: use it when you need it, share it.

You always have the latest news without the outlay that buying it would imply, “he points out, and recalls that personalized attention as a premium customer is added to the above.” The volume of customers may not be very high, but that allows the company have a more personalized treatment with your audience, closer. It fits very well with the objective of companies related to talking with the client, “adds Jiménez-Zarco.

A renewed model
As Inma Rodríguez-Ardura recalls, although we are now much more familiar with this model thanks to platforms such as Netflix, Amazon Prime or Spotify, the concept of subscription services is not new. Decades ago, many consumers began paying monthly fees to access gyms and clubs or subscribe to newspapers, cable television services, collectibles, and fascicles, to name just a few.

What is new, and is causing a substantial disruption in commercial distribution, is the fact that distribution strategies based on subscription services are gaining considerable traction, experiencing spectacular growth in sales volumes, explains the UOC professor. “What’s more,much wider range of categories of goods and services: data storage in the cloud, homemade food, cosmetics, gifts, clothing, cars, etc. “, he adds. Does that mean that it is a foolproof method? In Inma Rodríguez-Ardura’s opinion, the answer is no, since it is not without its challenges.

“To a large extent, these challenges have their origin in the high cost involved in attracting new subscribers and the abandonment rates of initially subscribed consumers, which in some cases can be very high,” he warns. However, once they have achieved a portfolio of clients, the future of these companies, with a business model that can be extended to practically all sectors, can be very profitable.

As Ana Jiménez-Zarco indicates, if users have subscribed to her services, it means that the first product test has been satisfactory., and if the company is able to maintain the quality standard in service and the customer is satisfied both with the product and with their own experience of use and dealing with the company, “the user will continue to renew, it is possible that they will buy additional products and will even recommend the service. “

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