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

Computer Arts - - CONTENTS - CHRIS­TIAN PURSER CEO, In­ter­brand Lon­don­ter­

“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, 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

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