Opting In To Subscription Services

By Fergus O’Reilly, hybris and SAP Customer Engagement & Commerce 

What used to be a pricing model limited to magazines, newspapers, utilities and telecommunications services, now encompasses just about any product a consumer or business can dream of. B2C and B2B industries alike provide a range of offerings, with services as diverse as printing to beauty products. 

However, customers have demanded a shift in the way they interact with brands — and retailers that don’t adapt to their customers’ preferences risk losing to the competition that embraces a much savvier and flexible framework. Digital disruption is much easier said than done though. 

A sophisticated IT framework and billing model is essential to the transformation and companies must have a strategic approach to their model. It’s important to be aware that the shift to a subscription-based model can have a profound impact on the nature of the business. Beyond the overarching transformation, the way revenue is recognized also shifts. 

Traditionally, companies are familiar with the seasonal spikes, however, with subscription-based services revenue is generated more evenly across the course of the year. For example, think about your traditional retailer with seasonal sales and promotions compared to a subscription-based retailer, like Rocksbox, where you pay the same fee every month to purchase or rent new items. With this type of payment model in place, brands should also be aware that the core company’s partnerships with various stakeholders will become increasingly important as a way to remain relevant and drive new products and services to the market. 

Defining The Elements Of Disruption 

Successful implementation hinges on several pillars, each of which must be executed effectively to the model to work. The five elements essential to the landscape include: 

1. Subscriptions: Today’s business model hinges on subscriptions and usage-based services instead of one-off purchases.
2. Ecosystem First: Bringing new products and services to the market with a focus on partners and third-party stakeholders helps to vary offerings to create a more competitive marketplace. 
3. Customer Experience: It’s important that the businesses approach digital transformation with an omnichannel mindset. 
4. New Markets: Part of the nature of the digital transformation is that businesses are able to pursue new verticals that may not have previously been available to them.
     
5. Developing New Go-To-Market Strategies: Some partner companies may not be amenable to the concept of transforming their business models to a service-based revenue model.
   Understanding these requirements before engaging in a subscription-based model is imperative. 

While these elements must be recognized prior to the transformation, it’s important to remember that the process will take place over time and progress must be tracked and measured in order to ensure execution is smooth. While success can be measured on a spectrum, retailers that strive to be the disruptive force of their industry must align with the five key pillars and recognize that digital transformation is no longer an option, but an end game, and they’re better suited to get in at the ground level. 

 Fergus O’Reilly is Vice President of Solution Strategy for hybris and SAP Customer Engagement & Commerce and an expert in the monetization of the Digital Transformation.