How to Succeed with “as a service” Subscriptions?

Many of us associate subscriptions with utilities, telecommunications, and newspapers. But now, when we can subscribe to everything from cars and glasses to clothing, we are witnessing a small revolution – simply put, “everything as a service.”

This brings a host of new benefits for consumers, with flexibility, simplicity, and sustainability being among the most important. Providers who can tailor their offerings and business models to match customers’ new desires gain a competitive edge.

What do you need to think about before offering your products “as a service”?

The first step in the plan is to assess the market potential. While most things can be offered as a service, it doesn’t mean all products are a good fit with this business model. There are some distinguishing factors within the product landscape that are worth knowing about. Some of these may even seem somewhat contradictory, but they are not.

One key aspect is pricing versus depreciation. We are more inclined to subscribe to expensive products with high depreciation, while we prefer to buy inexpensive and generic products.

Yet, eyeglass subscriptions have become a huge success. How does this fit in?

The answer lies in the providers of eyeglass subscriptions being clever and realizing that although the base product is generic (the glasses themselves), they can package eyeglass subscriptions in such a way that it feels unique and valuable to the customer.

Most of them offer annual eyeglass replacements, free replacements for lost glasses, and a free annual eye exam. With these additions, customers receive value on top of the product, making it attractive to subscribe even if the monthly cost over the subscription period is higher than simply purchasing the glasses.

Subscriptions for Expensive Products and Services

A related trend is our inclination to subscribe to expensive items to avoid having to tie up our own capital. Prime examples are the markets for cars and boats, where the number of subscription services has exploded in recent years.

In addition to avoiding capital commitment, freedom of choice and flexibility are strong drivers for customers of these subscriptions. They can freely switch cars when their needs change, and they can test boating for a few months without having to deal with the purchase of a boat, finding a mooring, and maintenance.

Subscriptions Contribute to Sustainability

Sustainability is a key point for many who are transitioning their consumption from buying to subscribing, especially among young adults under 40. These individuals are not necessarily looking for the best “deal” but are genuinely concerned with keeping their consumption within climate-neutral boundaries. To achieve this, sharing, reusing, and recycling are essential. Subscription services for luxury clothing are an example of a concept that sells almost exclusively based on this value.

They are more expensive than the buying alternative, with a smaller selection and a higher chance that others have been sees wearing the same clothes (which apparently matters in this segment). Nevertheless, these subscriptions are among the winners in the new subscription market because the value of not disposing of clothes after a short period of use is perceived as significant by the target buyer group.

In terms of the business foundation, there are various approaches. What’s essential is to conduct a thorough analysis of your product range and customer base (and potential new customers) to determine if you are a good fit for a recurring model, whether it’s a subscription, rental, or sharing concept.

Flexible IT and Financial Systems Allowing Automation

The other critical point for any recurring business is to ensure that you have flexible IT and financial systems that enable full automation and a high degree of self-service. Regardless of the recurring model we are talking about, they all share a common trait: complexity that surpasses that of traditional sales. It involves upgrades (which are very enjoyable), downgrades (not as enjoyable but necessary to offer), switching, pausing, changing payment methods, and so on.

Manual support for these processes is detrimental to any scaling efforts. Take the time to develop a robust specification that stands firm during both the establishment phase and what happens afterward. It may take a little more time getting you up and running, but it’s far more cost-effective than having to switch subscription platforms mid-flight.

Smooth Integrations

The final point revolves around the ability to establish effective integrations. There is no subscription system that includes all conceivable features out of the box. The good solutions on the market are “best of breed” in core functionality, with the rest being handled through integrations with other specialized systems.

Take providers of sharing and rental concepts as an example. They also require a logistics system to keep track of the flow of goods between themselves and their customers. With the right subscription system, you can easily connect the third-party solutions you need to create a seamless and automated ecosystem.

The Key to Growth

To sum up, almost anything can be sold through a subscription. To succeed with subscriptions in today’s service-based economy, you must understand customer needs and, ideally, add value through additional services. Flexible IT and financial systems that allow automation and effective integrations with other systems are crucial. With the right approach, subscriptions can be the key to both business growth and sustainable development.