Christian Purser on why subscription models are the future of business
Following in-depth study, Christian Purser reveals why subscription models beat ownership every time
“Ownership looks increasingly passé to the children of this generation. They want access, not ownership. A relationship, not a transaction. Flexibility, not commitment”
For close to two decades, Interbrand has been calculating the brand value of the top 100 global brands. It will surprise few that, in that time, technology brands have risen inexorably to the top of the tree. Six of the top 10 most valuable brands are tech brands, which, when we consider the radical change that technology has brought to our lives — how we spend our time, attention and money — makes sense.
But technology isn’t changing only where we spend money, but how. This in turn is increasingly changing not just business, but business models. The concept of ownership looks increasingly passé to the children of this generation. They want access, not ownership. A relationship, not a transaction. Flexibility, not commitment.
It’s a fair bet that you have Netflix, Amazon Prime and Spotify — or more likely all three. Perhaps you also have Adobe Creative Cloud, or joined the Dollar Shave Club. Maybe you’ll be eating a meal kit from Hello Fresh for dinner this evening. The rise of the subscription economy knows few limits.
In recent years, we’ve witnessed firms using subscription models to grow their brand value significantly. Indeed, the number of brands in our study offering subscription-based services has grown from just 18 per cent in 2009, to 29 per cent in 2018. The reasons brands are building subscription businesses to outpace the competition are manifold, but where did the demand come from?
The software and entertainment industries led the pack here, quick to shift to models of subscription as technology would allow it. Netflix is a good example. It started with DVD.com, delivering discs to subscribers, until the point that internet bandwidth was strong enough to host video. Adobe’s Creative Cloud is the same. For years single-purchase CD-ROMs or painfully slow downloads were the only way to install a program like Photoshop. If you needed the software for a single project, it was expensive. Now you can just use it as you need it.
These companies were fast to market with digital-only products and subscription services, offering the idea of buying ongoing access, rather than a one-off product. This is taking hold in every area of life, be it unlimited flights through Surf Air, or a great shave sent by post from Harry’s or Dollar Shave Club. All for a monthly fee, of course.
Beyond generating revenues, we’ve found that brands using subscription models are better at creating deeper relationships with their customers, as they use data-driven insights to generate more personalised products and services. A great example is Netflix, which by combining subscriber insight with market-leading creativity has won 112 Emmy awards, all while overtaking Disney’s market cap last May.
The subscription mindset is spreading fast. From food, to fashion and beauty, to mobility, brands are waking up to the power of building a business around a subscription-based model. And while the idea of subscription isn’t totally new, the direct insight that subscription brands can collect and harness to deliver better and more personalised services is giving them an advantage in building long-term loyalty in their customer relationships.
Do you think your business would benefit from developing a subscription-based service? It’s not always the answer to the question of growing, and it can sometimes be tough to see the opportunity, but, looking at data from Best Global Brands, building subscription-based business has been an iconic move for many of the top global brands. This is a trend that’s only set to continue as technology, societal change and brands continue to change how we live.
Do you think subscription-based brands build better relationships with customers? Tweet your thoughts to @ ComputerArts using #DesignMatters