In our recent blog post about why the subscription-based revenue model has become the go-to platform of today’s businesses, we discussed how today’s customers would rather be charged with a regular payment in exchange for a “service” or access to resources for a set period instead of owning that “product” and take care of its maintenance. Some examples include Michelin that offers tire as a service, and Rolls Royce that provides airlines “Power by the Hour,” among others. This model affords businesses the advantage of recurring revenues, while also providing customers a great user experience in the following ways:
Customers are spared from expensive upfront purchases.
Before the rise of the subscription economy, businesses and individual users had to pay hundreds and even thousands of dollars for a single word processing or image editing software application. These days, customers can simply pay as low as seven dollars per month—or 70 dollars a year—in exchange for a word processing service, or 240 dollars a year for an image editing software service. Similarly, industrial companies such as Pneumafil Nederman now offer clean air as a service, instead of traditional industrial one-time payment contracts for air filters. Companies that used to sell compressors are now offering compressed-air-as-a-service—and the same applies to car ownership nowadays (cars as a service). This model gives enterprise customers the ability to scale up and scale down by cutting their subscriptions should the number of users within the organizations decrease due to changes in supply and demand.
The model eliminates the hassle of ownership and maintenance for customers.
To win and retain customers, you must keep it simple. That’s what subscription-based services do. In a market dominated by a generation who prefers “renting over owning,” subscription-based services are a perfect fit—and virtual products, such as software and entertainment, are no exception. Customers subscribed to word processing software services or image editing services no longer have to constantly update their license and software version manually, one installation and reinstallation after the other. Similarly, as owning a car is poised to become a thing of the past, car companies are phasing out car sales and focusing on cars as a service.
From reactive to predictive
Subscriptions services are data-driven as it allows providers to monitor customer behavior through consumption, and usage patterns. The behavioral insight from membership plans and operational data helps companies shift from a reactive to predictive mindset and deliver an overall better experience to their customers.
Make the shift.
As today’s customers are moving to subscription-based services companies must transform their business model from offering products to offering the product’s value as a service.
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.