Tech giants release subscriptions, not products

Why the tech industry is flocking to the ‘much-loved’ new business model.
5 April 2019

One of the Subscription Economy’s founding fathers? Source: Unsplash

Last week at the Adobe Summit in Las Vegas, Shantanu Narayen, president and CEO of Adobe reiterated that it is ‘experiences’ that keep consumers coming back for more, not products. A recent Gartner survey suggests that in only two years, 81 percent believe that they will be competing on the basis of customer experience (CX).

Adobe’s AI-powered features in its experience platform promise to make every moment personal and every experience shoppable. How? By managing, personalizing and optimizing the commerce experience across every touchpoint. Adobe also believes that the entire customer experience lifecycle can be managed across four simple steps: ‘Discover, try, buy, use and renew’.

There appears to be a trend developing around the final step of the CX lifecycle. Many new startups are already struggling to obtain funding without a recurring revenue business model. At the other end of the scale, tech behemoth Apple is shifting its attention to recurring subscription models too.

As users upgrade their phone less frequently, Apple hopes to tempt users with a new range of streaming packages and a magazine subscription. Over 100 million Amazon Prime subscribers pay a subscription to access to free delivery of the latest must-have items. Elsewhere, Netflix is racing towards 150 million subscribers, and Spotify is getting closer to hitting one hundred million paying customers.

Welcome to the booming subscription economy where many companies are increasingly finding the allure of recurring revenue too hard to resist. By charging under $10 a month, it’s widely thought that customers don’t worry about the price. In many ways, the subscription has become the digital equivalent of a gym membership that many people have, but don’t necessarily use regularly.

The much-loved new business model is attractive to businesses for obvious reasons, such as increasing cash flow. Traditionally, a brand has charged a one-off payment in exchange for product or service. By contrast, subscriptions enable businesses to receive regular, recurring sales, throw in superior customer experience, and many will remain loyal to your brand.

There are currently over 2,000 subscription box services for customers to choose from. Sure, it provides a reliable stream of revenue for brands of all sizes. But if they fail to provide a unique personalized experience, they could find themselves on the unsubscribe list.

News that Burger King has launched a coffee subscription will be the first of many similar services aiming to drive deeper brand loyalty. Adoption of the subscription lifestyle is already here, and businesses are reluctantly shifting their attention from products or services, and towards the customers themselves.

Although it’s a combination of our personal data and complex algorithms that promise to transform CX, most of us just want a more convenient and lower-cost way to get what we want. However, as these monthly fees quickly begin to stack up, there is an argument that the subscription economy is not sustainable for the long term.

The problem is that many of us are becoming oversubscribed to a myriad of services. Video streaming alone already involves a choice between Netflix, Amazon, Hulu, Now TV and HBO. As Apple and Disney arrive predictably late to the party, it can only be a matter of time until we see some much-needed consolidation in this space.

Businesses of all sizes will continue to explore the benefits of offering subscription services to their customers. Some will be online only, and others will be in boxes delivered to your door and designed to make you smile at the end of a hard Monday at the office. How successful they are will be determined by how much they genuinely know their customers and provide unique customer experiences that will build a relationship with the brand and secure their loyalty in the process.

A few years ago, IBM’s Bridget van Kranlingen said that “the last best experience that anyone has anywhere, becomes the minimum expectation for the experience they want everywhere.” Adobe appears to have picked up the baton and is bringing the concept of a personalized customer experience lifecycle to life.

We shouldn’t be too surprised to hear that the subscription economy has grown more than 300 percent in the last seven years. We are living in a mobile-first digital world where new business models are emerging as the direct result of our insatiable thirst for instant gratification within a swipe on our smartphones.

It’s easy to dismiss talk of a subscription or experience economy, along with other industry buzzwords such as digital transformation, and CX. However, it’s crucial to remember that it’s not businesses driving transformational change, but a global audience with a continuously evolving set of expectations.

Maybe Adobe’s mantra of ‘discover, try, buy, use and renew’ is the perfect partner to fuel the growth of subscription services and continue to raise the bar of exactly what the customer experience means to us all.