Product-only businesses beware, a new commercial era defined by “the end of ownership” has arrived.
A recent report published by Zuora provides the figures to support what many have already recognized: consumers no longer want to own “stuff”.
The report surveyed 13,459 adults, across 12 countries on changing consumer preferences as the Subscription Economy rises. The demand for fluid services over static products is growing at a steady rate, as an ever-increasing proportion of consumers recognize the benefits of pay-as-you-go subscription models.
In an analysis of the perks of subscription-based services, convenience tops the list of benefits of subscribing, winning 41% of votes. If something is provided as a service or a subscription, the service provider generally takes on the burden of maintenance, repair or upgrades. Although you, the consumer, reap the benefits, all potential inconveniences remain the responsibility of the service provider.
More than 7 in 10 international adults currently have subscription services, indicating a clear shift in consumer buying habits. “Access over ownership” appears to be the new consumer imperative driving this shift: consumers want to be able to use the product or service, but they don’t want any of the associated risk.
This is evidenced by the statistic that 70% of international adults agree that subscribing to products and services frees people from the burdens associated with ownership, such as maintenance, clutter and depreciation. Take for example, the average movie and TV show enthusiast. Previously, they would have been forced to buy and clutter their homes with DVDs. Now, for one monthly subscription fee, they can watch hours and hours of their favorite shows online via content providers such as Netflix.
It’s not only consumers buying goods for personal use that are making this shift towards the Subscription Economy. Many companies are opting for subscription-based services, paying monthly charges for amenities ranging from coffee, to software, to the light in their facilities. Paying a monthly subscription fee rather than an upfront capital expense not only frees up capital to be invested in other areas of the business, but also removes the need to invest your business’ hard-earned cash in depreciating assets. As an added bonus, maintenance and upgrades are normally included as part of the service charge.
Businesses who adapt to this shift in buying behavior are growing faster and making more money. According to Zuora report, over the past seven years, companies across North America, Europe and Asia Pacific, have seen their subscription-based sales grow by more than 300 percent, representing an 18% CAGR. That’s about 5X faster than S&P 500 company revenues and U.S. retail sales, according to the Zuora Subscription Economy Index.
The facts and figures are there: whether you’re a consumer or a vendor, it makes sense to go subscription-based.
You can download the full report here.