The End of Ownership is Near - How the Subscription Economy Has Permanently Changed the Way We Buy

Updated: May 26

Whether it’s a weekly shipment of meal kits or the monthly access to Netflix and Spotify, subscription models are the rage these days, no matter the product, service, or industry. And it’s no surprise — did you know that the average US consumer had an average of 12 paid media and entertainment subscriptions pre-COVID? Millennials led the charge, with an average of a jaw-dropping 17 subscriptions, followed closely by Gen Z with 14, and Gen X with 13. 27% of consumers planned to subscribe to even more services in the future.

The numbers are astounding — and if one takes a quick stock of the subscription services in their lives, they may find that they too, have more subscriptions than they ever cared to realize. When additionally factoring “freemium” models which businesses often employ (where users can enjoy free services by sitting through advertisements on regular intervals), and one quickly sees that there are potentially even more subscriptions that people are actually enjoying — except it is paid for with time and attention, and not cash.

The subscription economy is growing fast. In fact, it has grown over 435% in the last nine years, and only increasing its pace as consumers become more and more comfortable with owning less, experiencing more (that is, paying for experiences and not goods), and exchanging money for convenience. Covid-19, for all of the devastation that it has brought, has also accelerated a change in behavior of consumers now actively willing to pay for certain things which likely would not have happened pre-pandemic (e.g. grocery delivery, food deliveries, and more).

This upward trend is expected to continue as consumers have begun to show time and again that they value access over ownership.

First Things First — What Exactly is the Subscription Economy?

The term “subscription economy” is a relatively new one, seemingly introduced by Zuora upon their release of the Subscription Economy Index. This index, released in early 2021 and covering a time period spanning between 2012 to 2020, measures the growth of hundreds of companies around the world across industries spanning from Software-as-a-Service (SaaS), Internet of Things (IoT), Manufacturing, Publishing, Media, Telecom, Healthcare, Business Services, and Education.

In general, the subscription economy refers to the general trend where consumers are shifting from a traditional model where they pay each time they want to consume a good or service, to one where consumers pay on a recurring basis and can consume an unlimited (or set threshold) amount of goods and services.

Additionally, with the growing amounts of data that companies have access to, consumers have grown increasingly comfortable with having companies recommend products and services to them during the subscription experience. Therefore, it is no longer enough where a user receives a subscription, but that subscription must be tailored to their individual preferences — else the business risks losing their customer’s attention elsewhere.

Leveraging a more analog example, remember a time when physical newspaper and magazine subscriptions were normal in our day to day lives. Each day (or week/month), your favorite newspaper, magazine, or newsletter, would arrive at your doorstep — ready for you to read and absorb all of the information inside. Every subscriber would receive the same newspaper, magazine, or newsletter — with no customization performed for the purchaser.

In today’s subscription world, consumers are demanding more, and such a generic approach previously taken by subscription-based businesses would likely not succeed. Look around and you will find that this isn’t hard to see. Compare your Netflix home page with that of your neighbor, and you will see different content displayed, and different

recommendations/suggestions. Compare YouTube and Spotify home pages, and one will find the same. Subscribe to meal kits? You may receive a package for a chicken pasta dinner while your vegetarian friend may receive instructions on cooking a gourmet mac-and-cheese during the same week.

In the end, it is not enough to only provide a subscription model, but to also customize it to maximize the user experience, and to keep them coming back for more.

Businesses Need to Adapt — It’s Not Just About the Product

While no Compound Annual Growth Rate (CAGR) estimates are available for the subscription economy, a look around our daily lives and one will quickly see that the subscription model is only expected to rise in the years to come.

With companies like Uber, each passing generation is less and less incentivized to learn how to drive — and by extension, own and maintain a car. What was once a “rite of passage” for many young men and women as one of many symbols of evolving into an adult, is now seen as unnecessary and a financial burden. While one may argue that companies like Uber fall into the “sharing economy”, in many ways, the sharing economy can be closely linked to the subscription economy. Uber now sells subscriptions, after all.

Perhaps a more appropriate example revolves around scooters and bicycles, of which such ride-sharing companies promote subscription models for their customers — to allow for unlimited riding per month of the devices under management of the relevant company. Better yet, companies like Netflix, Disney+, Apple, Hulu, and more, are “upping” the subscription experience by now releasing “A-List” movies on their platforms. It would have been unfathomable just two years ago to see the Fast and the Furious franchise or movies from the Marvel Cinematic Universe (Black Widow) show up in movie theaters and on streaming platforms on the same day.

But is this truly enough? After all, as we learned in the last section, the subscription economy is about more than just having access — it’s also about having personalized access. And herein lies what Companies need to consider going forward:

It’s about relationships. It’s about knowing what your customer wants.

While customer focus has always been important, the subscription model has elevated that demand/requirement several-fold. More than ever, businesses need to be obsessed with how customers are experiencing their product or service. Besides being readily available to answer customer queries, to address complaints, and to assist in general, businesses need to find ways to collect customer preferences, and design tailored products for them to enjoy.

For a meal kit business, this may be knowing that a customer’s birthday is coming up, and in an upcoming subscription box, a particularly exquisite meal can be found, along with a personalized birthday greeting. For a subscription company in the pet business, this may be anticipating that harsh winter months are ahead for a subscriber’s pet — and including some complimentary boots in their next subscription box to protect their dog’s paws while they trek in the snow.

Looking Ahead

Consumers have increasingly begun to value access over ownership, but each generation is also beginning to place deeper value on experiences as well — as it has direct ties to decreasing ownership of things. In addition to individuals no longer needing to buy a new car, they want to know that the rental car or the shared ride that they will soon occupy has been tailored as best as possible for their comfort.

Therefore, businesses will not only need to adapt to the growing shift of ownership to subscribership, but to also identify new ways of being customer obsessed, customer focused, and customer tailored. In the new subscription economy, such behaviors will undoubtedly separate the great from everyone else.