The Subscription Economy: what do your customers want?

Last week, I was fortunate enough to hear Tien Tzuo, founder from Zuora speak at a conference.  He’s a real visionary, and in fact he coined the phrase “Subscription Economy”.  Hearing him explain what it means, bringing to life the concept really hammered home the need for every single business to sit up and listen.  The basic principle, according to Tien is that ownership is lame, it’s all about subscription in our connected world.  When you think about it, when was the last time you went to a store to purchase a CD, versus downloading the latest tunes on your mobile device?  Or even such major decisions as purchasing a car – many people decide instead to do a multi-year lease with the option to hand back their vehicle after 3 years and replace with a brand new one.  There are many examples of how ownership is being replaced by subscription in the way we do business, and this is driving (and being driven by) consumer-led evolution of business.

Back in the 1970s, product dominated business models, but by the 1990s, the need to focus on the service, as well as the product was marking out the top performing businesses.  For those of us who are passionate about business, we’ve been talking about customer-centric operating models, putting the customer at the heart of everything.  The subscription economy now takes this one step further – relationship is now the core to business growth and success.

What do you mean by this, I hear you ask?  Think about in your own business:

  • Generalisation has given way to customisation (make it feel unique to me, personal and relevant)
  • Ownership has been replaced by outcomes (the end goal keeps moving, so why would I want to own it?)
  • Planned obsolescence is now trumped by constant improvement (who isn’t waiting for the very latest version on their new mobile device?!)

When you consider these factors, none of the above can be delivered by product alone. It’s about the relationship you have with your customers, and how you use the data you’ve gathered.  In the past, competitors copying your product was a real threat, but what they can’t do is steal your knowledge of your customers.  We need to be challenging ourselves every day to consider how our products and services meet the needs of our customers, and as customer experience practitioners, using the many and varied sources of customer knowledge to make the experience more meaningful to the customer.

One of the most exciting aspects of the subscription economy is that as subscribers, rather than owners, our customers form a habit to rely on our products and services – subscription by its very nature is a behaviour that is regularly repeated.  Customer knowledge lets us make that habit easier to form (a “sticky” customer experience), as the customer shares their behaviour with us.  However, we must be careful not to be blasé – as easy as it is to subscribe to your product or service, it’s just as easy to switch to someone else.  The subscription economy does not tie the customer into a long term relationship with our business in the way that ownership used to.  The part I like the most is that the subscription economy is less about dramatic big bang change, and much more about iterative evolution of products and services – with each change, you adapt your product & service more to customer needs, based on listening to the customer and applying the knowledge.

Whilst this is driven by software and technology, it impacts all industries.  Even behemoths like Microsoft, with their move to Cloud-based Office 365 are embracing this shift.  Others, such as Adobe decided to take the plunge and transform from ownership to subscription overnight as long ago as 2013 – see here for an article at the time.

The closing comments from Tien Tzou in his keynote speech at the conference was a challenge to the audience, which I’ll extend to you: what cultural changes do you need to adopt business-wide to create a subscription centric culture?

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