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Understanding the Consumer Market for the Subscription Economy

Updated on November 16, 2016
Online retailers can benefit from encouraging customers to subscribe to their latest offers.
Online retailers can benefit from encouraging customers to subscribe to their latest offers.

What is the “subscription economy”? It’s a term coined by Zuora to describe a new business model where companies rely less on single transaction sales and more so on subscriptions. Businesses that utilize this model still provide products and services, but instead of charging per transaction, they receive monthly fees in return for a continuous delivery of products/services. This could be the in the form of digital content such as Netflix and Spotify, or as a monthly subscription to products such as clothing and food.

How It Started

The subscription economy is the natural progression of the consumer market towards online. As services like Amazon have created dominance in providing goods online, consumers are finding ways to further optimize their online buying process.

By paying on a monthly basis, consumers can reduce the time and effort to buy the products they desire. What subscription-based companies offer is a more personalized, complex, and direct relationship with businesses. Generally, this means better customer service from businesses as their model becomes less about attracting new customers and more so about keeping existing customers happy.

How does this model benefit businesses?

Business trends are a two-way street, and the subscription economy is no exception. What many online retailers have been struggling with is inventory and unpredictable purchasing patterns. However, when shifting to a subscription model, you will in time have a steady and predictable revenue stream.

Inventory can be better controlled and curated because managers will spend less time worrying about overhead and more on how to best provide for customers. This is important because businesses and their digital marketing strategies have had to become more personalized. Subscriptions give customers the opportunity to give feedback each month and provide businesses with more information to take the guess work out of marketing as well as being able to conduct data analysis.

How to Market in the Subscription Economy

Finding high quality leads are even more important for subscription-based businesses. These businesses require customers to devote some sort of commitment, meaning you need to target audiences whose profile matches those looking to be return buyers.

When committing to a subscription, consumers are more likely to trust friends that have referred the company. Marketing teams must capitalize on this and devote more resources to referral programs, more so than other businesses.

A Focus on Retention

As mentioned before, the success of a subscription service is based on satisfying and retaining your current customer base. For marketers, you must see this as the basis of your campaigns and shape your content to keep current customers engaged and interested in their subscription. For example, if your company delivered monthly boxes of clothes, it would be a good idea to send emails or post content on social media outlets that showcase the styles featured for that month’s box. You can also build excitement by giving sneak peeks into next month’s box. The key is to constantly remind current customers the value you offer.

Hopefully the resources you pour into your existing customers will shape a passive marketing campaign that will effectively promote your brand. Customers will refer your services, share your products on social media, and give you positive reviews online. By focusing your efforts on pleasing your subscribers, you will organically generate high quality leads and ultimately gain more exposure.


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