Last updated: Catering to the connected customer with subscription models

Catering to the connected customer with subscription models


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Subscription-based business models are surging in popularity. It seems like nearly every day there is a new subscription service available for consumers to opt-in to. The subscription billing market is surprisingly mature and touches several different industries. A few well-known examples are The Dollar Shave Club, BirchBox, RocksBox and Blue Apron. The appeal of subscription services to consumers is simple: there is an inherent flexibility as well as an additional emphasis on loyalty that goes above and beyond traditional one-time purchases.

Consumers long ago stopped needing (or wanting) to go out to physical stores every time they needed razors, health and beauty products, or grocery items. People want to fill out a one-time online form, and then simply receive their product of choice each month without even having to think about it. These types of subscription models are changing what’s possible from both transactional and relationship standpoints.

While there are many obvious benefits for the customer, it’s not always easy to see the tremendous advantage of this business model to brands. Because subscription-based models are focused on a consistent relationship with the consumer as opposed to just selling a product and moving on to the next client, brands are able to have regular touchpoints with customers. This, in turn, translates into large amounts of data that is regularly captured, providing organizations with a steady stream of new information, which helps them continually learn more about their target audiences.

Successful brands will use this data by analyzing it in real-time, enabling them to use the insights gleaned to provide personalized experiences. This allows them to build stronger relationships with their customers, catering to their every need and therefore creating a superior experience. It’s a win-win: the brand learns more about its customer base to enhance experience, thereby driving loyalty and sales; and as a result, consumers receive personalized products reflecting their preferences delivered to their front door or digital device every month without having to lift a finger.

Consumers expect this level of personalization from brands that they engage with. SAP Hybris recently released a commissioned study conducted by Forrester Consulting, which revealed that 61 percent of consumers are less likely to make future purchases following less-than-satisfactory personalized experiences. Furthermore, just 31 percent of consumers report that companies are consistently delivering personalized, cross –channel experiences. Since consumers are opening their lives up to brands and sharing large amounts of personal data, they expect value in return.

The shift to new revenue models reflects an industry-wide change in how value is created and earned. Companies are no longer interested in thoughtlessly pushing their products to consumers; rather, they have learned that today’s consumers want to be in control of their own experience, so companies have adapted their business models accordingly. With this additional engagement sought after on behalf of the consumer, brands are able to collect the data needed to allow consumers to create their own personal journey.

In a sense, subscription models are the way of the future. The digital era has allowed our machines to know us sometimes even better than we know ourselves. With data continuously being collected from a multitude of sources, from clickstreams and location data to readings from sensors embedded within “smart cities” around the world, this has been made possible.

And, the more data that is gathered, the better and more accurate brand recommendations can be. Think about services like Amazon Prime and Netflix, whose suggestions are so intelligently targeted that they have fundamentally changed the way consumers shop or watch television. Customers regularly declare their expectation for personalized content, while also voicing their requirement that this be done in a way that respects their privacy, summarized as the golden rule of “don’t be creepy.”

Data captured from subscription services is precisely what enables such personalization. The subscription economy is giving customers what they want, when they want it, on either a weekly or monthly basis. The companies who can deliver on these expectations are the ones who will ultimately win in the digital economy.

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