Subscription-Based Services: A look at the Market Posted on 2014-04-17 16:17:00 by House of Kaizen

Subscription–based business models are not a new concept (think magazines, newspapers and clubs such as Wine of the Month) but leveraging the model online has allowed for more creativity and a huge increase in the ability to sell products and services that have not traditionally been sold via subscriptions.

Industry watchers cite recent advances in technology, including cloud computing, as primary drivers in this societal shift to new consumption and delivery models. The worldwide market is estimated at $500 billion, according to an October 2013 study by the Economist Intelligence Unit.

As consumers and businesses look for more flexible and convenient ways to access and price desired services, new models of ownership have risen through the emergence of subscription, rental and sharing businesses, causing a major transformation in a wide range of sectors including financial services, healthcare, media, retail, technology and telecommunications.

According to the Economist Intelligence Unit research, four out of every five (80%) businesses are currently seeing changes in how their customers prefer to access their services. As a result, over half (51%) are integrating new pricing and delivery models such as subscriptions, sharing and rental goods and services, rather than selling products outright. Of those, subscription-based models have emerged as the primary means to do so, with 40% of the responding companies implementing subscription services as part of their core business.

Currently online subscriptions are being used to sell a wide range of products and services including flowers, underwear, gourmet food, shaving supplies, dating memberships, dog supplies, software and household goods.

The general consensus among, industry analysts, investors and merchants is that successful subscription models are not tied to specific categories or segments, but rather when a product or service is a necessity or when it indulges consumer passion.

Here are some common subscription segments:

  • Clubs (Wine of the Month, dating memberships)
  • Recurring Products (beauty and personal care)
  • Perishable/Replenishable goods (flowers, food, household goods)
  • Publishing/content (newspapers, magazines, movies, access to content websites)
  • Services (insurance, financial services, B2B offerings)
  • Sharing and Rentals (handbags
  • Software (virus protection, productivity applications)

Unlike the old days where subscriptions relied on consumers to opt out (and made that an overwhelmingly onerous task), today’s online subscription models come in a variety of types. Some businesses employ more than one of these online subscription models. This flexibility provides multiple paths to attract consumers.