When I was a kid, there were three channels on TV. You had to be home in your living room to watch your favorite shows at the exact time when they were broadcast. Now? I can binge on Westworld, The Walking Dead, or Leave it to Beaver, whenever and wherever I want. There are hundreds of satellite and cable options like Hulu, Netflix, AppleTV and Amazon Prime offering something for everyone. NBA Channel, heck yeah! This explosion of choice is happening in practically every category and industry. Where once there was a narrow selection of vendors offering a limited range of products, we now have a seemingly endless selection of offerings with a vast range of consumption options.
Buyers have embraced this cornucopia of choice with a healthy appetite to trial, test, and experiment. Brand loyalty is increasingly fragile and fleeting as buyers seek new solutions that specifically address their needs. This lack of buyer commitment is driving brands to offer new purchasing models such as pay-as-you-go service access, guaranteed consumption rates, individually configured bundles, and subscriptions that allow consumers to adjust consumption as their needs grow or change. It can also represent a source of recurring revenue for the vendor, which is an attractive business model for a number of reasons.
The On-Demand Evolution
This shift to on-demand buying preferences started with inexpensive retail goods like groceries and spread to luxury categories like women’s fashion. It then expanded to durable goods such as automobiles. Increasingly, we see businesses that sell to other businesses also adopting the subscription business model, even for complex machinery. Giants such as Rolls Royce let companies buy hours of jet engine usage. Medical device manufacturers charge for MRI machines on a per scan basis, and automotive companies such as Volvo and Porsche are driving full speed into monthly vehicle subscriptions.
As this trend evolves, subscription-based products and service offerings are set to dramatically increase. Subscriptions have exploded in recent years for everything from cosmetics to packaged meal kits. In fact, meal subscription services are expected to exceed $3 billion in 2018. It isn't just niche services that are taking advantage of this shift in buying behaviors. Fortune 1000 industrial names are exploring this game-changing development and rethinking business models to accommodate new ways to sell products and services.
We're entering an era of experimentation where consumers are questioning the very notion of ownership. Why should they invest in a product upfront when it’s cost-effective to access the service or output the product provides, and pay for it via a subscription that changes and evolves as needed? An entire generation of buyers is learning that they can have the convenience of almost any product or service, without the traditional cost and complexity that comes with ownership. We are seeing that the flexibility of subscribing trumps the status of ownership. It's the end of ownership.
What it Means
The opportunity to innovate business models and engage buyers in closer, recurring relationships is both huge and daunting. Organizations must rethink internal systems and processes to accommodate new ways of offering products and services to support the complete customer lifecycle including sales, service, fulfillment, invoicing, revenue recognition, customer satisfaction, and renewals. That means tightly integrating processes from the front office all the way through the back office.
You can prepare your organization to meet these challenges by examining the end-to-end customer experience and planning how to provide customer facing personnel with the precisely the right data and information that empowers them to do their job with confidence and speed. Done properly, you enable your company to generate additional revenue from your goods and services and thrive as subscription consumption becomes the new normal. Welcome to the end of ownership.