Why a subscription model could be the future for all businesses

How pioneer Zuora drives the global business paradigm shift to the Subscription Economy
The growth of the subscription economy

In a world where the consumer wants very specific things and wants them instantaneously, keeping a customer base happy is more difficult than ever before.

As such, flexible, customisable subscription services are spreading across different sectors like wildfire as businesses strive to meet the high expectations of customers and clients.

We spoke to Tien Tzuo, the founder of subscription software provider Zuora, to find out why his firm are becoming increasingly busy.

TechRadar Pro: There have been a lot of discussions lately whether companies should be adopting subscription business models or not, for example around the BBC license fee. Why?

Tien Tzuo: It makes perfect sense for all companies to adopt the subscription business model. Why? Well, in the modern world our needs are being fulfilled by services, rather than one-off purchases.

Once customers taste streaming video rather than buying physical DVDs, using Zipcar rather than buying your own or storing business files in Box as opposed to on your own server, they want all their lives to work as simply as that. This is what we call the Subscription Economy.

A recent survey of 293 business executives in the US, UK and Australia, commissioned by Zuora and conducted by the Economist Intelligence Unit, found that four out of every five businesses surveyed are currently seeing changes in how their customers prefer to access their services.

It's a trend that is impacting every industry, which is why the BBC license fee is an anachronism. It's not about granting someone a "license" to access the content, it's about crafting bundles and subscriptions that cater to each individual's preferences.

The BBC is supposed to be an information service, but needs to evolve in order to fulfil this promise in the modern age.

TRP: How are organisations reacting to this trend?

TT: Businesses have become very aware of this trend and are reacting by reinventing themselves and launching new services. 51 per cent are integrating new pricing and delivery models such as subscriptions, sharing and rental goods and services.

Of those, subscription-based models have emerged as the primary means to do so, and 40 per cent of these companies have implemented subscription services as part of their core business.

You can look at almost any industry to find lots of great examples. You want access to millions of songs from any device without purchasing and downloading them? Then stream your music with Spotify. You only want to read – and pay – for your favourite newspaper columns? Then become a News Corp member and compile your very individual Times newsfeed.

Or you want healthy snacks each day but can't be asked to go out and buy them? Let graze deliver them to your doorstep.

TRP: Which benefits bring subscription services to customers/businesses?

TT: For customers, it's about accessing the services they want, how they want it. Every customer is unique and has different, ever-changing needs, so businesses that still try to sell one-size-fits-all packages that lock customers into long-term contracts will be left in the cold.

Customers appreciate the flexibility with which they can tap in and out of their services when required, and the associated convenience of such an "I-get-it-now" lifestyle.

For businesses, it's about customer relationships. Why? Because subscription services provide businesses with the opportunity to better understand their customers and develop longer-lasting and more meaningful relationships.

Long relationships in return drive new, more predictable revenue streams, a sharper competitive edge and a stronger business foundation.

12 per cent of organisations say subscription models already represent more than half of their revenue, a number that is expected to grow rapidly, as 84 per cent anticipate that this share of revenue will increase over the next two years.

Desire Athow
Managing Editor, TechRadar Pro

Désiré has been musing and writing about technology during a career spanning four decades. He dabbled in website builders and web hosting when DHTML and frames were in vogue and started narrating about the impact of technology on society just before the start of the Y2K hysteria at the turn of the last millennium.