Welcome to the Subscription Economy. Historically we lived in a product economy, with businesses designing, building, selling, and shipping physical things to faceless consumers. No more. Across all industries -- from media to software, transportation to retail, and beyond -- we’re seeing that consumers don’t want to own things, they want access to them: services over products. This transition towards a Subscription Economy, where consumers subscribe for the services and outcomes they want, is happening worldwide.
We can particularly see subscriptions becoming more mainstream in the United Kingdom, where 40 million Brits (78 per cent of the adult population) now subscribe to at least one product or service and 12 per cent of Brits’ disposable income goes towards subscription services. Perhaps nowhere are we seeing this shift more clearly than in the IoT realm, where consumers can use connected devices to directly achieve their desired outcomes.
Over the next year or so we’re going to see a huge consumer shift towards connected devices in the United Kingdom, towards using IoT to extend the capabilities of products to truly meet consumer demands. According to a recent UK-wide report conducted by Zuora and YouGov on IoT -- A Nation Subscribed: 2016 State of the UK Subscription Economy -- there is already high demand for IoT services across all industries and sectors, with 45 per cent of Brits desiring home security, 37 per cent smart city services, 41 per cent smart healthcare services, 37 per cent smart city services, and 25 per cent self-driving car services, amongst other possible IoT solutions.
The trends here suggest that Brits are continuing to look ahead towards a world of connected devices and services. Businesses looking to capitalise on this need -- and monetise it -- need to focus on these three main concepts:
Access – Delivering what consumers want, when they want it
The concept of “access” is key to subscriptions for Brits with 62 per cent reporting that the ability to gain instant access to the things they want is important. Similarly, 47 per cent say that subscriptions make their lives more convenient and 40 per cent say they give more flexibility than buying and owning products.
The statistics reveal that the modern consumer is primarily concerned with the outcomes and convenience, proving that you need to truly orient your business around your customers: When, where, and how do they want to use your services?
For example, the success of the FitBit ecosystem is down to the devices’ ability to give users the information they desire instantly, so that they can maintain a healthy lifestyle – whether that be how much sleep they’re getting or what speed they need to be walking to meet their daily fitness goal.
This is not to deny the obvious fact that there are still physical products involved in IoT. But the focus isn’t on these objects; it’s on using these objects as a means to deliver the experiences that your consumers desire.
Upgrades – Offering ongoing value
British consumers expect solutions that offer ongoing value. What they want are connected devices which constantly upgrade and adapt to consumers’ needs -- rather than physical products that constantly degrade and lose value. The message here is that standalone products are simply no longer sufficient. The definition of “ownership” has been translated to mean managing the decline of a physical asset.
That said, Brits still think it’s important to own the products they use, to some degree. But, at the same time, there is an increased expectation that these products will be upgradeable. Fifty per cent of Brits say that subscriptions make upgrading and maintenance easier. The automotive industry is a prime example for this trend. Mercedes-Benz now offers a range of connected cars that allow you to adjust a Nest thermostat, check home security cameras or turn the kettle on.
But it is Tesla that is really ahead of the game here. Tesla is renowned for surprising their drivers with new services through over-the-air software upgrades, and customers have woken up to discover that their cars can suddenly respond to voice commands and automatically adjust their suspensions. As the Subscription Economy grows, constant upgrades such as these are only going to get more common, and before we know it’ll be the norm to subscribe to the latest software for your car rather than purchase a new one.
Personalisation – Customising the customer experience
To satisfy consumers and build customer loyalty, businesses need to learn how to create compelling subscription experiences that can learn and adapt based on user behaviour. Across the UK, 49 per cent of Brits say that subscriptions allow them to discover new things based on their personal tastes and preferences. As the traditional purchasing and advertising habits have changed (think social media), this will be a huge selling point for consumers -- and a huge upselling and cross-selling opportunity for businesses.
By focusing on personalisation, IoT products and services become more valuable to the user. Just look at Google’s recent coup: the launch of its Home voice controlled speaker. It allows users to interact with Assistant, the company’s new artificial intelligence-powered virtual assistant, which adapts to when, where and how you use it. You can have a voice conversation with a machine that learns about you and responds with your personal information, not just some generic searches pulled from the web. Currently, the IoT experience doesn’t get any more personal than that!
And when you can surprise and delight your customers on a consistent basis, whether that be by playing their favourite song without them asking or giving a truly valuable answer to just one question, you build the foundation for building a happy and loyal customer base. The holy grail of any business -- IoT or otherwise -- is to have long-term relationships with loyal customers.
To learn more about how Brits subscribe and which industries will next be disrupted by subscriptions, check out the full report: A Nation Subscribed: 2016 State of the UK Subscription Economy.
John Phillips, VP EMEA at Zuora
Image source: Shutterstock/Olesia Bilkei