Where to Next? A Look at the Future of the Subscription Economy

GoRecurring 18 August 2022

You’d be forgiven for thinking that the subscription economy is a fairly recent phenomenon. Coined by leading monetization platform Zuora in 2015, the subscription economy describes the ongoing adoption of subscription-based business models across industries. 

But the truth of the matter is that subscription-based businesses have been around for generations. It was through subscription models, for instance, that people paid for milk or newspapers to be delivered at their doorstep every day. Meanwhile, “subscribing” to the charitable work done by community-oriented organizations by paying periodical installments dates back to the 17th century. But despite it being a revenue model that’s steeped in history, what we’ve experienced in the last decade is the new face of subscription-based businesses.

Today’s Iteration of the Subscription Economy

In the last decade, there’s been a massive resurgence in subscription-based business models — and it merits the attention it’s received. It marks a significant shift away from the product-based economy, where people primarily focused on purchasing and owning things. Now, they’re more willing to enter into longer-term relationships with brands and businesses, participating in a recurring revenue model that might better suit their needs. It lives across sectors, from entertainment and cloud computing to household goods and wellness. 

But what inspired this change?  

One of the biggest drivers is the evolution of customer expectations. Today, customers want experiences that are personalized, customizable, and convenient. They want to be able to readily access what they pay for, and opt out as easily when they don’t want or need the service anymore. For companies that have been looking for ways to better answer these new customer expectations, and build relationships that allow them to garner better insights, a subscription model makes sense. As an added bonus, adopting a subscription model gives companies access to a recurring revenue stream that can offer more stability in the long run. 

What Subscriptions Look Like in the B2B Space

While this approach is particularly well suited for the B2C space, and has largely been developed there, I believe there’s a growing space for it in B2B sales. At the end of the day, B2B buyers are influenced by the experiences that they have outside of the office — and they bring those same expectations to their vendors. 

This has had a really interesting impact on B2B providers. In terms of the customers we work with at Subscription Factory, we’ve been engaged by many organizations that are reinventing themselves to participate in this new space. They want to add digital services to their offerings, which they can then sell through with a subscription model. For instance, an appliance company could offer smart, sensor-based technology with their industrial washing machines, and their customers could subscribe to one of various tiers of that technology depending on their needs. Alternatively, a company that sells truck fleets might want to provide fleet management software under a subscription model. 

A word of caution as companies embrace this trend. Don’t jump into offering a digital service just for the sake of having a subscription model in your pricing sheet. Take your time in figuring out if it really makes sense for your business — otherwise, the recurring revenue you’re working towards will be negligible. 

My advice? Regardless of where the idea comes from (your CFO, your competitors, your product managers, or your account managers), ask yourselves these questions. Is there a market for this service? Will our customers pay for it? If so, how much? Then you can start thinking about the execution, whether you have the right resources to get a product like that to market, and what your subscription model will look like. Will customers pay monthly or yearly? 

What else is next for the subscription economy? 

To me, the future of the subscription economy lies in it no longer being a phenomenon. Here’s what I mean by that. 

Subscription models are really just an alternative form of payment for the services you offer. The fact that they’ve become so popular is just a response to customers wanting more flexibility and optionality in the way they engage with businesses. So, my view of the future is that they will become even more normalized than they are now. 

Companies will stop seeing subscriptions as an experimental pricing exercise and start including them as a normal part of doing business. They will shift their goals towards building long-term relationships with their customers, and that will be reflected in their marketing efforts, product roadmaps, and more. Customers, both individuals and companies, will gravitate to the brands that are providing options, giving them the flexibility and peace of mind that’s required during ongoing times of financial, political, and environmental uncertainty. 

In other words, the subscription economy is here to stay.