Dating back to the Industrial Revolution, when technological advances enabled companies to churn out products faster (and more cheaply) than ever before, our consumer culture has been very transaction-based. If we needed something, we bought it. When it broke or ran out, we replaced it. Businesses sold things, and customers bought them. Subscription models—paying a periodic fee for access to goods or services—were traditionally limited to newspapers and magazines.

However, over the last decade, we've seen a seismic shift in how consumers think about buying. Two attitudes, in particular, are driving this shift:

• Convenience: As consumers (especially buyers in the B2B space) find themselves stretched thinner and thinner, they're focusing on convenience, thinking, "How can I get some time back?" Often, that's having consumables, toiletries, or office supplies. For example, if they are delivered regularly rather than spending time shopping for them once a month.
• Value: Whether the goal is increased sustainability, decreased spending, or both, consumers are thinking more about value, often less interested in owning—particularly items they may not use on the regular—and more interested in using. This situation could mean subscribing to vehicle services to cut down on car payments for public transit users, or it could mean subscribing to Netflix for access to all-but unlimited movies at the price of one Blu-Ray disc per month.

The subscription economy far precedes COVID. At the end of 2018, Forbes reported, "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." Similarly, Salesforce found in 2019 that more than half of finance executives say at least 40 percent of their current revenues are recurring, and even more expect to reach that level within the next five years. However, the pandemic certainly spurred the growth of these models as subscriptions allowed consumers to access products they needed without leaving the safety of their homes and control their value-to-cost calculations as they tightened their wallets. At the same time, these models offered businesses much-needed revenue stability in a time of unprecedented disruption.

(Learn more about the benefits of subscription models to businesses and consumers in our recent blog post.)

And even post-COVID, the rise is showing no signs of slowing down, with the global e-commerce subscription market expected to reach $904.28 billion by 2026, with a CAGR of nearly 66 percent. At the same time, the subscription billing and management services industry has also taken off. In 2020, subscription billing and management was a $6.03 billion industry, and that revenue is expected to reach more than $15 billion by 2028 at an annual growth rate of more than 15 percent.

What Industries Can Benefit from Subscription Models?

Subscription billing models seem like no-brainers for SaaS companies, streaming media services, and products buyers use up and repurchase regularly. More and more, however, businesses in a wide range of industries are adding recurring revenue models to their offerings. You can read more in our recent blog post, but here are just a few examples:

• Transportation: Car ownership is no longer the given it once was, and many commuters are finding it makes more sense to use than to own. This rental model could be short-term, such as with carshare companies like Zipcar, Car2Go, and rideshare apps like Uber and Lyft. But even traditional vehicle manufacturers—including Audi, BMW, Cadillac, Jaguar Land Rover, Mercedes-Benz, and Volvo—are getting in on the subscription game. In turn, they are offering long-term subscriptions in which drivers pay a monthly fee that includes damage protection, liability coverage, and vehicle maintenance for a certain number of miles driven.
• Health & Wellness: Though gym memberships are nothing new, COVID caused the popularity of other fitness subscriptions to skyrocket as even more people brought fitness home. Peloton, for example, is perhaps the best-known at-home fitness brand, offering a variety of workout classes to subscribers, whether they've bought the company's branded equipment or not. However, countless other brands also provide subscribers with a wide range of on-demand virtual workout classes for a significantly smaller monthly fee than the average gym membership.
• Gaming: Like video streaming, gaming subscriptions offer players much more variety than they can achieve by purchasing individual games. Now, rather than purchasing or renting individual games ad hoc, players can subscribe to Xbox Game Pass or PlayStation Now to stream a wide variety of games on demand. While there was some trepidation in the industry as to whether gamers would embrace these streaming offerings, the results have been overwhelmingly positive.
• Home Maintenance: While it’s common for specific maintenance providers—HVAC companies, for example—to offer preventative maintenance subscriptions, other providers are entering the recurring revenue space in an even bigger way. While the range of services these companies provide varies, the gist is that, for an annual fee, companies like Super, Handy, and Austin's PreFix will vet and manage service providers and give customers a single touchpoint for whatever they need to be done around the house.
• Internet-of-Things: As we enter a new smarter world of smart devices – ranging from coffee makers to water heaters, for example, to anything in the cloud – we are all living in some form of a subscription economy right now. Forbes reports the game-changer in subscription economy relates to assets that are heavily connected to the internet of things, but not solely in the SaaS space. For example, Caterpillars 2M assets and sets of applications are “diving better user success levels” in the subscription billing industry.

How Can Businesses Best Take Advantage of Subscription Models?

It's clear that subscription models aren't some fleeting trend and benefit both customers and businesses in a wide range of industries. But as you prepare to introduce recurring revenue in your organization, starting from the right foundation is essential to ensure these models empower, rather than hinder, your growth.

Companies offering simple, straightforward business models such as one-time purchases or perpetual licensing can use simple, straightforward platforms to power billing. Still, successful subscriptions require something a little more robust. From automating invoicing, renewals, collections, and revenue recognition to tracking the ten critical metrics for subscription billing to being flexible enough to handle unexpected ups, downs, and hairpin turns, a sophisticated billing system is required to ensure these business models work like well-oiled machines. (Learn the five things every CFO needs to know about subscription billing in our recent blog post.)

For many businesses, the sophisticated billing management required to support successful subscription models is unfamiliar or uncharted territory. But the truth is, the right platform is no longer a convenience—it’s a must-have for companies that want to retain customers and meet their growth projections. The Gotransverse platform is designed with subscription billing models—and all of your current and future recurring revenue needs—in mind. To learn more about how we can help your business make the most of its new or existing subscription models, we invite you to take a virtual tour of our platform today. Then, when you’re ready, request a complimentary demo to speak with one of our experts about whether Gotransverse is right for your organization.