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Why the subscription model will save businesses in 2021

Amandeep Singh, Business Director and Branch Head, VMLY&R Delhi, explains how the subscription economy has been growing at a rapid pace over the past few years and holds a great future ahead

Amandeep Singh

Towards the end of 2019, I was writing a piece about subscription models in India with my prediction of models which should (and would) launch in 2020. Little did I know that a pandemic would change the world as we know it. The world was caught off-guard and businesses were caught pants down. In a time when eCommerce has seen 10 years of change in 8 weeks, it’s time for all businesses to rethink their strategy. Direct To Consumer has been on everyone’s mind, but most businesses are debating and discussing its viability, with very few taking quick action.

It is no surprise that subscription models have not just survived but thrived. The Subscription Economy® has grown more than 400% over the last 8.5 years, according to Zuora’s latest Subscription Economy Index™. The SEI further mentions that subscription sign-ups are on the rise, and while S&P 500 companies saw sales contract at an annualised rate of negative 10% in Q2 2020, subscription businesses in the SEI expanded at a rate of 12%.

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In India, the automobile sector has been embracing the subscription model at a fast pace. The largest brand Maruti Suzuki announced its plans to ramp up its offering named – Maruti Suzuki Subscribe recently (Read more). Hyundai also started its subscription model in partnership with Revv. 2021 would see almost all the players make the same announcement in the market. In fact, the next evolution in the automobile sector would be providing in vehicle “add on features” also on the subscription model.

While many brands are trying to jump into the model, it is very important to understand the concept. Here are three key tenets making the Subscription Economy successful:

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1. Customer centricity: The premise of launching a subscription model is to achieve customer centricity. No model does a better job of focusing on consumer needs to transform the business from product- to customer-focused.

Let’s paint a picture. Imagine a customer-centric company in the food business. The core objective of this company should be enabling its customers to create great food or be a great home chef for the guests they have over. Once a company has shifted its focus to outcome, it can then build a whole experience with customer at its centre. Such a food company can then move to subscription models, which send out recipes, inspiration as well as products one needs to cook great food at home. A mobile app could build on the opportunity by providing recipes videos, interactive workshops, classes and more. By targeting the unmet needs of the consumer — in this case, the need to entertain at home, the business is creating a new, unique, customer-centric experience that will build brand equity faster than one that competes on price and product superiority alone.

2. Better revenue predictability:  Subscription is a shift from selling units to building recurring revenues. Think Amazon Prime, Netflix, Spotify, Dollar Shave Club, Apple services — the common thread holding them together is the ability to drive customer lifetime value.

3. First-party data: Data is DNA of the subscription business. First party data, direct connections with customers and invaluable data signals allow subscription companies to keep a check on the pulse of consumers. A shift in consumption patterns or a change is customer preference — there you are, all ready to change your services accordingly

I was super excited to see at least one of my predictions coming true with launch of subscription model for alcohol in India. Tapped Flight launched beer subscription in Mumbai, prompting thousands of beer lovers embrace the brand with open arms. With the lockdown in place, beer lovers were left parched and craving for their favourite drink. Tapped Flight came to the rescue, providing a beer subscription right to their doors. Not just any beer but you can get new brews, brands with every delivery bringing you surprise, delight and world of happiness in a bottle.

Apart from alcohol delivery, agriculture has been only sector in India defining the odds of the shrinking economy. In India more than 85% of the land holdings are less than 2 hectares, making it difficult for farmers to afford farm mechanisation products and achieve economies at scale. Mahindra-owned Trringo was the pioneer in launching tractors and farm mechanisation services on subscription model. Today we have more such services being offered right from TAFE’s Jfarm to government of India also announcing a similar service. The service makes it possible for small farmers to subscribe to these machines as per their needs during the seasons. There is a huge potential across the farming value chain right from agri inputs (seeds, fertilisers, mechanisation) till ensuring farmers get the right price for their produce via the subscription model.

Farming as a Service model as a concept can provide these services to farmers at an affordable monthly fee via their mobile phones. Farming as a Service, or FaaS, is a farm management solution that leverages the power of technology and data to help increase the yield, bringing better growth in agriculture. Oxen Farm Solutions, Ninjacart and Cropin are some of the players that are disrupting the Indian farming space. Mahindra’s “Krish E” is doing great work in farming as a service space for Indian farmers (Read More)

Startups in “FaaS have seen an upward trend, with successful launches and funding rounds”. Keep an eye out for this sector progressing even more towards subscription models in 2021.

Let us jump in now to predictions for 2021. I am confident we will see multiple subscription businesses launch in India in the coming year.

1. Dental care

Surprisingly, there seems to be no subscription model for dental care in India despite it being a repeat-purchase category with high brand loyalty. India has a population of over 1.3 billion, and nearly the entire population, across age, demographic and geography, uses dental care products such as toothbrushes, toothpastes and more. This could see a company like Colgate-Palmolive offer a new toothbrush, toothpaste and a free dental consultation on owned tele dentistry every three months. Companies like Quip, Boka, Goby are doing great job in Western markets. For a subscription fee, they would send you all the products for dental care at a frequency, including toothbrush, electric toothbrush heads, toothpaste, floss and more. Many of them have launched a service of “Dental Pass” on subscription giving discounted access to dentists and services for their subscribers. 2021 should see Indians enjoy a subscription that takes care of dental care of their whole family.

2. Smoking and accessories

Ask any smoker how many times they used the app Dunzo, a 24x7 delivery app that picks up and delivers just about anything to your doorstep, to get their pack of smokes during lockdown or how they would have found it a blessing to have subscription of cigarettes. You could add accessories like lighters, papers and, of course, mouth fresheners to the pack.

3. Date at home

With restrictions on commuting and dining out, as well as safety concerns, our ideal scenarios for romantic dinners or date nights have had to change. Additionally, more couples have accepted and adapted to the idea of staying at home. Why not have a service which gives you a “Date Night” experience right at home. I have my own idea, but I would rather let your imagination take flight on this one!

4. WFH subscription packs

Working from Home (WFH) has become a reality for us, and businesses have jumped at the change. Shopping for remote-working equipment, such as desks, chairs, lamps, reading corner décor and comfort wear has exploded as people are spending most of their time at home and need constant inspiration. A subscription of WFH products would enable remote-workers to rent or lease products instead of owning them, allowing them to switch or upgrade to new ones after few months. The bundling opportunities are immense.

A unicorn is waiting to happen in this space.

To conclude, business transformation has become a critical piece for companies in India to stay relevant for the customers and ensure they are future-proofing their business models. The consumers today have increasingly become comfortable with using digital in their life because of convenience and safety concerns. Subscription model brings together the power of technology, data and experience to deliver ultimate customer centricity for a business. For companies, it is a holy grail into the world of recurring revenues with greater profit margins and better visibility towards future cash flows.

(Amandeep Singh works as Business Director at VMLY&R India and is based in New Delhi. He is also an expert and evangelist of subscription models being an avid subscriber in his personal life. You can follow his Vlog series focusing on Subscription models and economy in India on LinkedIn.)

(Disclaimer: The opinions expressed in this article are those of the author. The facts and opinions appearing in the article do not reflect the views of BestMediaInfo.com and we do not assume any responsibility or liability for the same.)

Info@BestMediaInfo.com

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