Welcome to Subscription World – From Ownership of Products to Usership of Experiences

Rather than placing the spotlight on the product or the transaction, subscription puts the focus back on the customer, shifting to long-term relationships and experiences rather than selling products, writes Aditya Kilpady.

Welcome to Subscription World – From Ownership of Products to Usership of Experiences

Rather than placing the spotlight on the product or the transaction, subscription puts the focus back on the customer, shifting to long-term relationships and experiences rather than selling products, writes Aditya Kilpady.

The old world was about products. The new world is about experiences. The old world was about ownership. The new world is about usership.

Welcome to the subscription world.

We have moved from the product economy as the consumer landscape has shifted from traditional pay-per-product to subscription-based models. According to management platform Zuora’s Subscription Economy Index, subscription businesses in the index grew 4.6 times faster than the S&P 500 over the past decade.


 

As the pandemic ground the world to a halt, consumers retreated to the comfort of their homes and embraced digital services. Economic pressures and changing attitudes prompted Asian consumers to consider new notions of ownership, with subscription becoming the new buying.

China witnessed a subscription gold rush thanks to the country’s extensive delivery networks combined with its penchant for new technologies. According to a McKinsey report, 89% of Chinese adults had at least one subscription service in 2020. Companies like Taobao, JD, QQ and China’s own subscription video-on-demand (SVOD) services like Tencent Video (WeTV), Bilibili, and Youku Tudou are using subscription models to foster long-term relationships, boost loyalty, and deliver revenues.

“From manufacturing to fashion, we are seeing the SaaS-i-fication of traditional businesses adopting a subscription-first business model where products are offered as a service, and the value provided is not ownership, but usership.”

Indian e-commerce marketplace Flipkart introduced Flipkart SmartPack, which allows customers to receive a free smartphone when they pay for a 12- or 18-month subscription, purchase a smartphone and receive a 100% money-back guarantee. In Indonesia, Disney+ Hotstar partnered with telecom group Telkomsel to provide subscribers local content through a monthly internet package.


 

From manufacturing to fashion, we are seeing the SaaS-i-fication of traditional businesses adopting a subscription-first business model where products are offered as a service, and the value provided is not ownership, but usership.

The New York Times tech journalist Kara Swisher proclaimed that “Owning a car will soon be as quaint as owning a horse.” Singapore’s first subscription-based car rental platform, Carzuno offers all-in-one insurance, roadside assistance, maintenance, and the car for a monthly fee, without any loans or down payment. A line in the Audi Select subscription program website captured this perfectly: “All of the power. None of the responsibility.”

Airlines are fast adopting the subscription model. Southeast Asia’s leading low-cost carrier, AirAsia, launched SUPER+, a subscription model that is the first in the industry. AirAsia offers unlimited services that resemble Amazon Prime and Netflix in the streaming services.

Image via AirAsia

For as low as USD $140 per annum, subscribers can get unlimited flights across multiple Southeast Asian destinations, as well as free delivery of AirAsia Food ordered and insurance coverage under the pre-departure Covid protection plan with a one-year SUPER+ subscription.

India launched its first subscription-based airline, Prince Air. For a monthly subscription of USD $747, a member can fly across New Delhi, Mumbai and Bengaluru as frequently as they want.

Microsoft recently launched PC Game Pass, its game subscription service, in Indonesia, Malaysia, Philippines, Thailand, and Vietnam. PC Game Pass includes a library of games including Age of Empires IV, Back 4 Blood, Marvel’s Guardians of the Galaxy, and Minecraft; Xbox Game Studio releases on day one; and an EA Play membership. Subscribers can receive the first three months of service for USD $1.

Try Now, Buy Later is a first-of-its-kind service from Singapore-based Lendor that allows people try products before deciding on one to own. By reducing the amount of waste generated, lendees get a chance to do their part for the environment by purchasing only that they will utilize.

Style Theory in Indonesia and Singapore is making luxury fashion affordable by eliminating the need to purchase expensive products and accessories. Working on a subscription-based model, Style Theory uses machine-learning algorithms to personalize clothing and recommendations based on consumers’ browsing and rental history and decides which designers and styles to carry.

“For businesses, subscription creates an ecosystem where the default customer behavior is retention, as opposed to churn. Subscription models help retain customers, monitor usage, account for recurring revenue, and deliver value to eventually build long-lasting relationships.”

Humans are creatures of habit, and feeding habits is one of the reasons why subscriptions are so popular. Subscription services offer low cost, convenience, variety, and customization— a win-win for customers and businesses.

The biggest win for consumers is cost. Big-ticket expenses such as housing, health care, and education continue to climb faster than wage growth. For many products, a monthly subscription fee is more accessible than a higher, one-time expense. There’s also the convenience factor. As consumers seek ways to simplify their lives, the set-and-forget nature of subscription services helps them do so.

Finally, subscription models give customers the feeling of owning different products without the cost, responsibility, and clutter. Rather than watch the same movies repeatedly, OTT users have a library of films. Instead of deciding which car to purchase, people with car rental subscriptions can choose from entry-level to luxury vehicles.

With tiered pricing structures and tailored recommendations, subscription models allow the level of service that meets their needs — no more, no less.

For businesses, subscription creates an ecosystem where the default customer behavior is retention, as opposed to churn. Subscription models help retain customers, monitor usage, account for recurring revenue, and deliver value to eventually build long-lasting relationships.

The subscription society is becoming a force to be reckoned with, and nowhere is the shift from ownership to subscription more visible than in Asia-Pacific. Home to some of the fastest growing economies in the world, the subscription economy is rising thanks to local start-ups as well as international players.

In an industry where customer acquisition is the biggest challenge, subscriptions are growing in popularity. Rather than placing the spotlight on the product or the transaction, subscription puts the focus back on the customer. The formula for growth has now shifted to long-term relationships and experiences rather than selling products.


Image by Glenn Carstens-Peters

 

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