Three years ago, according to a McKinsey survey, the online subscription market grew by more than 100% percent annually, with large players generating close to $3B in sales. From entertainment subscriptions to software subscriptions—and now even in the manufacturing and B2B space, such as tires-as-a-service, trains-as-a-service, power by the hour, etc—there are many reasons why a subscription-based revenue model has become the go-to platform of today’s businesses. Here are some of them.
It is a data-driven model.
The XaaS business model is a data-driven business model. Subscription providers can monitor customer behavior. That’s advantageous for both sides because businesses can use that knowledge to create better services for customers. The behavioral insight from membership plans helps companies shift from counting almost meaningless page views to analyzing more valuable engagement metrics like time spent. It’s a healthy dynamic between the vendor and the customer.
It ensures revenues for business and eliminates hassles for the customer.
Subscription business models charge a set amount in exchange for access to resources for a set period. Anticipated recurring revenues is the most apparent benefit of this business model, though there are other advantages inherent in the subscription pricing model for both customers and businesses. According to Aly Pinder, IDC’s Program Director for Service Innovation & Connected Products, “It’s inevitable: selling products-as-services will become a major component of OEMs’ businesses over the next decade.” On the side of the customers, what they get is a hassle-free, “pay per use” approach.
It helps boost customer acquisition.
Today’s customer landscape is comprised mostly of millennials who will trade ownership for lifestyle—and that’s what the subscription economy provides. It helps them avoid huge upfront payments for software, for example, but it also gives them that hassle-free experience. The better the experiences are for a business’s customers, the greater the number of acquisitions will be. More customers mean more recurring revenues. That’s why signing up for a subscription service must be seamless. Excellent customer experience will improve acquisition numbers over time.
Choose lifestyle over ownership.
As today’s customers — both in the consumer and enterprise space — expect on-demand access and service without the responsibility of ownership and maintenance, companies are beginning to transform their business model from offering products to offering the product’s value as a service, which offers the following business benefits:
- Recurring Revenue Stream: New services and subscription-based models
- Dedicated and Engaged Customer Base: Intimate sticky relationships
- Predictive Instead of Reactive: Data analytics to provide customer insights and operational visibility
It’s evident that services, not products, are the future of business. Customer-centricity lets you offer subscriptions that will address your customers’ problems and satisfy their need for convenience. Taascom can enable your company to embark on your business model transformation by helping you make the shift from a transaction-based to a subscription-based revenue model. If you want to kickstart your business model transformation, contact us today.