Subscription Services before you get started and what you should know

The subscription economy is booming. Spotify and Netflix have become essential features of our lives within just a few years. The latest edition of Zuora’s Subscription Economy Index, published in 2019, stated that companies offering subscriptions saw their sales grow five times faster than the average growth of S&P 500 companies.

 The opportunities and growth curves vary from one industry to the next: companies offering subscription services in the IoT market are growing five times faster than the average in that sector, while the telecom sector ‘only’ differs by a factor of three. Long story short, the years ahead are looking good for consumer and business demand as well as growth opportunities for subscription service providers.

The first steps towards subscription services

There are basically two ways to start offering subscription services.

Method #1

Companies have a transaction-driven supply and want to start offering subscriptions – in addition to or as a replacement for the original products. Like Microsoft, for instance. For years, the IT multinational was known for its Office software licenses, until Microsoft introduced Office 365 subscriptions in 2013. Most Microsoft customers have a subscription now and receive constant software updates: extra functions, bug fixes and better security.

Method #2

This method is used by companies that focus entirely on subscriptions from day one. Swapfiets, a bike-swapping start-up, is a great example. Just like Spotify and Netflix, the Dutch bicycle company is a market disruptor that does things radically differently from traditional companies in that market. A brick-and-mortar bike shop is generally where people go to get advice on which bike they should buy (sometimes going years between visits), take a bicycle for a test ride and get their bike fixed as needed, Swapfiets has structured their whole business around making sure that their customers can always use a bicycle. To make this possible, the company’s back office has a completely different structure compared to a bicycle shop. Swapfiets has frequent and regular contact with customers on all sorts of things, including repairs, subscriptions and payments. Their communication channels are also geared towards facilitating customer contact through the website, by phone and via an app. And the company has set up a complex logistics system to get bicycles and repair workers efficiently and quickly to where they need to be.

Important choices before you dive in

Are you convinced that you want to start offering subscription services in your market? Then there are some choices you’ll want to make before you get started. This makes it much more likely that you will be able to introduce subscriptions and set up the operational side of subscription services effectively and smoothly. Choices include:

• Billing strategy: when and how often do customers have to pay?
• Pricing: what is the best price point for your company and for your customers?
• Product development: how do you ensure that you can constantly improve your product (like Microsoft) and inspire customers to stay with you as a result?
• Data deployment: companies that use subscription models collect far more data than transaction-driven organizations. How do you make sure that you can use that data to tailor your offer more precisely to customer needs in the future?
• Technical integrations: which systems should be able to integrate with your subscription back office?
• Scalability: how do you ensure that you are technically prepared for domestic and international growth?

In recent years, we have gained extensive experience in designing and building subscription services for customers. In the run-up and during implementation, we guide companies and help them to make the right choices. We have pooled all this experience and knowledge in a white paper.

In the white paper, we look at different subscription forms and explain a number of important benefits. We also provide a number of tips so you be well prepared when you start offering subscriptions to your customers, making the most of the opportunities that the subscription economy offers. Last but not least, we have listed some technical issues that you should definitely keep in mind if you want your subscription services to fuel future growth.