Not so secret services
Why buy when you can get so much more by renting? Welcome to the world of subscriptions.
Welcome to the world of subscriptions.
If you’re so inclined, you could wake up tomorrow morning to the dulcet tones of Spotify’s carefully curated morning playlist, before showering using products delivered in a monthly beauty box, then taking an Uber to work. At the gym in the evening, you could exercise with a virtual personal trainer app that encourages you through your headphones, before going home where your groceries have been delivered, already portioned into meals, so your only decision is whether to have chicken or pork. You could then settle in to watch television via a streaming service that delivers season two of The West Wing in just a few clicks.
This is the world of subscriber services that, although not new, is rapidly replacing the traditional view of owning “stuff”.
Subscriber services have been around a long time – newspapers have been popped into letter boxes for almost as long as they’ve been printed. The big change is the degree
to which people can contract out their buying decisions and essentially rent everyday goods.
Why buy a CD when you can access 30 million tracks from any device for the same price? Why buy a car when you can hire one by the hour?
Kym Niblock, chief executive of TV streaming service Lightbox, says the trend is about viewers feeling in control. “People are taking more ownership and control of their ‘me time’, and choosing how to spend it,” she says. “The interesting behaviour we see is binge viewing: people might choose to watch three episodes of the same show – it’s what fits in with their lifestyle.
“We also see multiple viewings in the household at the same time – people are choosing to use their time to watch their own shows.”
Lightbox has a customer r elations programme that monitors subscriber behaviour in a bid to keep viewers engaged.
“When people get inactive, we start emailing them, saying such things as ‘Here’s the new season of Suits, were you aware it’s on?’ and ‘We noticed you loved the last season of Outlander, it’s coming back on Tuesday and we wouldn’t want you to miss out.’ We’re letting them know what they wanted to see,” says Niblock, who is stepping down as CEO at the end of the year.
At the forefront of this shift away from a pay-per-product model to a subscriptionbased one are the oft-discussed millennials – those born from 1982 to some time in the early 2000s. Younger people tend to be more technologically savvy and open to “disruptive” technology, and having less cash to spend makes the prospect of a lower barrier to entry attractive.
DIFFERENT ENVIRONMENT
A report commissioned by California-based Zuora, whose next-generation commerce platform allows businesses to launch and monetise subscription products and services, points to consumers aged 14 to 25 as early adopters. About 60% of those surveyed in Australia and New Zealand by research house Ovum had subscribed to one or more services in the past five years.
“A lot of young people are growing up in a very different environment compared with what it was 20, 30 or 40 years ago,” says Bodo Lang, a University of Auckland senior marketing lecturer. “It’s a form of voluntary dispossession, not wanting to own any more because you can’t see the point in it, and the entry cost is so high, whereas the entry cost in a subscription model or the equivalent is much lower.”
A music subscription service such as Apple Music or Spotify will set you back $12.99 a month and a new album costs about $21 from the iTunes store. Signing up for Netflix costs $14.99 for a standard monthly subscription, roughly the same as a movie ticket or half the price of a new-release DVD.
Dispossession has its positives, Lang says – for a relatively small fee, you can get access to products, media and ideas you otherwise might never have seen.
However, it’s not necessarily all good. “We define ourselves through the ownership of items, and that goes back many hundreds and thousands of years to tools, cooking utensils and weapons in the Dark Ages, and now it’s iPhones, sunglasses, shoes and cars,” Lang says.
“If you don’t possess things any more, you’re just renting them, it’s going to be different. You’ve lost the ability to seem special and to deck out visually your life with your possessions.”
Successful subscription services rely on making the experience more personal – they won’t keep suggesting death metal if you listen almost exclusively to Taylor Swift. Personalisation stops consumers feeling commoditised and ensures they keep paying for platforms that feel designed for them even though millions of others use them too.
Service users are also paying to hand off decision-making in the confidence they’ll still get what they like, especially in areas where they don’t have expertise.
Personalisation ensures consumers keep paying for platforms that feel designed for them even though millions of others use them too.
MASSIVE CHOICE
Debbie Sutton is the co-founder of Wine Friend, which home-delivers cases of wine matched to your palate and preferences. Launched last year, the business is growing rapidly and taking on new investment.
People are faced with a massive choice when buying wine, Sutton says. “In the modern grocery store, there’s something like 48,000 items, but the largest category is wine.”
It’s quite a complex subject, too, and she says Wine Friend’s service is the closest customers will get to having their own “personal wine tutor”.
The desire for expertise goes hand-inhand with a lack of time, Lang says. Most people like researching their purchases but the large number of options available can be overwhelming.
“Subscriptions take some of that away – they say here’s a simplified or synthesised version of something we think is going to be pretty amazing for you, and most of the time they’re right.”
You can now get everything from pet treats to razors to mascara through a subscription service in New Zealand.
Although under-25s were early adopters, the Ovum research report shows Generation Y, aged 26 to 35, and the “silent generation”, who are aged 71 and over, are fast catching up as the dominant customers for subscription-led goods and services platforms.
Almost a third of those surveyed from those age groups had bought such a service in the past year, with fitness and clothing subscriptions particularly popular.
The disruption has happened – are companies ready for it?