Is the Subscription Economy the End of Ownership?

Since the industrial revolution enabled companies to churn out products faster and more economically than ever before, our consumer culture has been very transaction-based. If we needed something—no matter how infrequently or how short-term—we bought it. When it broke or ran out, we replaced it. Businesses sold things, and customers bought them.

But during the last several years, we’ve started to see a shift. Customers aren’t focused on things so much as experiences. They’re less interested in owning and more interested in using. And as a result, businesses are shifting their focus from products to outcomes and from sales to value.

Subscriptions Benefit Businesses and Their Customers

It started with software companies like Salesforce shifting to the SaaS model, lightening customers’ load by handling the logistics and maintenance while ensuring recurring revenue for themselves. A win-win. Since then, software companies have shifted en masse from one-time licenses to subscription models, but they’re not alone. Many B2C and product-centric companies have followed suit, allowing consumers to subscribe to movie streaming, car shares and TNCs like Car2Go and Uber, clothing rental, meal delivery services, and so much more.

At the end of 2018, Forbes reported that “the subscription e-commerce market has grown by more than 100 percent a year over the past five years, with the largest retailers generating more than $2.6B in sales in 2016, up from $57.0M in 2011.”

Customers are demanding better experiences and better offerings than ever before, and companies that take on the challenge are opening up revenue streams they’ve never had access to. After all research shows that recurring customers spend 67 percent more on average than new customers, and subscription offerings give vendors the opportunity to build loyal, long-term relationships with their customers (and, eventually, their customers’ friends). The shift to subscription also grows the customer pool by lowering the barrier to entry. On the client end, it’s easier to justify taking a risk on a new software — or streaming service or even designer clothes — when you can pay a lower price to try it out for six months or a year.

Managing Billing for Subscription Models

Of course, the shift from one-time sales to subscriptions means a shift to more complex billing structures that support new business models and empower those long-term customer relationships. Now, vendors are dealing with high volumes of unique customer events, varying recurrence periods, prorations, multi-service invoices, and more, depending on the complexities of the subscription packages.

Legacy billing platforms that excelled at smaller volumes of uniform purchases can no longer manage the growing numbers and complexity, and soon clients will start to see hiccups and interruptions in the billing process, while businesses start to see lost revenue and lost customers.

To successfully join the subscription economy, a business has to shift not only its mindset but its systems. Gotransverse’s intelligent billing platform is designed to handle subscription-based pricing models at scale, managing every variation and automating every step of the billing process to ensure efficient, accurate invoices and constant transparency for both the business and its customers. From custom billing timelines and automatic fee calculation to integration with the tools you are using today, our platform is built to streamline even the most complex subscription models and all the opportunities and benefits they enable.

As the subscription economy grows, we may be entering the end of the “ownership era.” If your organization is ready to move into the next phase of customer value, we invite you to take a tour of the Gotransverse platform and call us to schedule your complimentary, personalized demo.