There’s a new kid on the block in the business world; one that’s driving growth, cultivating long-term customer relationships, and providing a win-win-win for consumers, businesses and society. That new kid is the subscription economy and it’s here to stay.
Driven by customer demand for convenience and flexibility, recurring models are being embraced by businesses of all genres to grow sales and deepen customer loyalty. Everything from music and education to healthcare, beauty treatments and even airlines are now offering subscription payment models.
Birchbox, a three year old New York City start up, is a pioneer for how recurring revenue models can transform retail sales. For $10 a month, subscribers receive a box of sample cosmetics and beauty products. The company generated $40 million in sales in 2012, compared to $5.6 million a year earlier.
Dollarshaveclub is delivering a new shaver every month and experiencing meteoric growth, and BlackSocks.com has amassed 70,000 subscribers paying by installment for three pairs of socks delivered four times a year.
The examples don’t stop there. United Airlines has added a subscription billing service for frequent fliers, with a fixed monthly fee for privileges such as checked baggage and extra legroom, and Toyota in Europe is selling updates to its on-board navigation system to new car buyers through annual subscriptions.
A growing list of tech companies is also jumping into the fray. Adobe has moved from packaged software sales to subscriptions, and Microsoft has adopted a recurring model for selling selected products. Leading provider of open source solutions, Red Hat, has also had success, reporting first quarter revenue of $363 million, of which $316 million (87 percent) came from subscription services.
Recurring revenue models have exploded over recent years, estimated to be a $300 billion market in America alone.
It seems the new kid is making a difference on our shores too. Otago-based student start-up business MeatMail is now delivering 1000 kilos of meat per week through its subscriber based home delivery service. At the other end of the spectrum, Luxottica, a large luxury retail brand, responded to low cost and online retail pressure by introducing its VisionPlan subscription approach.
The subscription economy is rewriting the rules of business. Managing permutations and combinations of different pricing tiers, charging models, billing frequencies and product bundles is complex – that’s where technology partners make the systems work seamlessly and profitably.
One technology partner leading the charge as the engine of the subscription economy is New Zealand based Debitsuccess. Craig Marshall, Debitsuccess Chief Executive Officer says the subscription economy is transforming the business landscape.
“People have less time, more purchasing options, and increased pressure placed on their spending dollar so subscriptions are more convenient than large, one-off payments, provide reliable cash flow and ultimately increase business,” says Craig.
“Our unique service model for managing recurring payment adds value to any business or industry entering the subscription economy and successfully translates into many countries.”
Debitsuccess specialises in end-to-end management of recurring payments via direct debiting customers’ bank accounts or credit cards. Initiating over 22 million transactions, worth more than $1 billion annually, it has forged an enviable reputation as the leader in recurring revenue management.
There’s no doubt the new kid on the block is here to stay – and as more businesses embrace the subscription economy, its worth considering if it makes sense to offer customers a payment plan model for your product or service.
For more information visit www.debitsuccess.com