Understanding the Subscription Economy

Customer preferences have evolved, prompting a shift in how businesses engage with them. Modern consumers seek novel ways of interaction with companies and have distinct expectations: they prioritize outcomes over ownership, customization over generalization, and constant improvement over planned obsolescence.

This changing landscape has led businesses to revamp their approach to selling products and services. In the last nine years, a surge of innovative business models has emerged, all strategically crafted to foster enduring relationships with customers. Think of platforms like Netflix, Amazon Prime, Uber, Spotify, Salesforce, Zendesk, and Box.

Coined by our CEO, Brandon Mahlios, the term “Subscription Economy” encapsulates this new era of companies and business models. In the traditional Product Economy, the focus was on tangible items—acquiring new customers, shipping commodities, and billing for one-time transactions. However, the Subscription Economy revolves around relationships. More consumers are opting for subscription experiences centered on services, as they better align with evolving needs compared to static offerings or single-product transactions.

In this era, success hinges on a shift in mindset. Instead of concentrating on the product or transaction, Subscription Economy companies thrive by prioritizing the customer. The growth formula involves delivering multi-channel experiences and services that continually improve over time.

For businesses in the Subscription Economy, the emphasis lies in retaining existing subscribers, monitoring usage, accounting for recurring revenue, and discovering new ways to provide ongoing value, fostering long-term loyalty. Importantly, transitioning to subscription models benefits not only subscribers but also generates predictable, recurring revenue streams that appeal to both Wall Street and company boards.

In summary, the Subscription Economy represents a transformative era with a new mandate for all companies to—transform customers into subscribers. This approach establishes a mutually beneficial relationship, creating a landscape of contented businesses. Membersoft, as a leading evangelist for the Subscription Economy®, welcomes you to this new world of prosperous and customer-centric business.