A world subscribed

What is the subscription economy and why is it important?

In 2015 alone, some of the world’s biggest companies like Apple, Amazon and Tesla have expanded and launched streaming services supported with subscription-based business models. These launches reflect a wider change in the way business is being transacted. In both our business and consumer lives, we are moving away moving away from buying products outright, to subscribing to services instead.

We call this new business environment the "subscription economy".

We don’t buy digital song files any more, we subscribe to music streaming services which we can access under one account through multiple devices. Instead of relying on physical servers to store information, companies prefer to use cloud-based services like Box, giving them the flexibility to space up quickly as their businesses grow.

Companies like Spotify, Zipcar, Netflix and Graze are the vanguard of the subscription economy because they have recognised this change, and offer customers a completely new experience where they can access the goods and services as they like, whenever they want and wherever they are.

By building business models based on ongoing relationships, those companies are providing constant value to their consumers, rather than selling products to strangers in isolated transactions.

Relationship Business Management

The transformation of the technology industry over the last decade has been phenomenal, and the meteoric rise in the number of connected devices and the data collected by them has been pivotal in the shift to subscriptions. Leaders from the likes of ‘traditional’ corporations like Schneider Electric to Cisco are increasing their emphasis on business transformation, with a particular focus on customer lifetime value. Subscription business models are now regarded as the most effective way to monetise that value in a way that aligns with customer experience.

Categories like ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) have created tremendous value for SaaS companies, as seen with the success of companies like Salesforce.com and NetSuite.

But there’s a new category emerging: Relationship Business Management, or RBM, which works alongside ERP to help run a subscription business. Traditional ERP systems just aren’t made to cater for the new financial requirements that are unique to subscription businesses, like recurring revenue, and unifying commerce. RBM works to complement the ERP and CRM systems with the right billing and finance processes so customer relationships take centre stage.

When a business sells a subscription to a service or product, the whole business model changes – and this shift requires new data-centric ways of thinking, which comes with real challenges for many companies. You want to make it easy for customers to add more services whenever they want. You want to cross-sell and up-sell. You want to persuade your customers to buy more with trials and promotions.

RBM was developed specifically to meet the needs of the subscription economy, and track the customer-centric data that success requires. It helps businesses to build up insights and create identities based on factors such as how often, how much, and how exactly a subscriber uses the product or service relative to other benchmarks.

The predictive analytics can help the business to forecast future events, such as a renewal or upselling opportunity, and provide specific guidance to the subscribers on which features or aspects of the service they will get the most benefit from.

Forward thinking for the future

The RBM system is the power force behind the beauty of subscriptions. By understanding customers better, subscription businesses develop longer-lasting and more meaningful relationships. The simple fact is: value is created over time — not up front.

In return, long relationships drive new, more predictable revenue streams, a sharper competitive edge and a stronger business foundation. Today, the customer is no longer king – the relationship is.

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