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Subscription vs ownership - which is better?

April 28, 2021

In 2019, the public spent more money on subscription-based services like Spotify and Masterclass than on physical CDs and DVDs for the first time in any year. Businesses are evolving to meet customer expectations around flexible purchasing options by offering subscriptions rather than ownership.  

A recent poll carried out on behalf of Zuora, a cloud-based subscription management platform, showed that more than 70% of adults believe that subscribing to products frees people from the burden of ownership and that people will subscribe more in the future.

Similarly, a recent study into car ownership showed consumers already favour short-term leasing over ownership and by 2030, private car ownership in the US could drop by as much as 80%.  

Traditionally,companies asked you to pay upfront for products to ensure they covered the cost of manufacturing goods.

Whereas in 2021, consumers focus more on experience and no longer see owning material goods as prestigious, preferring more flexible subscription-based services instead.

This change was highlighted in a study by Eventbrite, in which they write, "For this group (Millennials), happiness isn’t as focused on possessions or career status. Living a meaningful, happy life is about creating, sharing, and capturing memories earned through experiences that span the spectrum of life’s opportunities".

Subscriptions have always existed in one form or another, but they haven’t always been popular,chiefly because they didn’t benefit businesses. In an ownership model,companies only needed to convince their customers their product was worth buying once—continuing customer satisfaction wasn’t necessarily high on the priority list.

Businesses that use a subscription-based model, on the other hand, must continue to demonstrate their value to their customers or risk losing them to a competitor. This need for consistent quality and innovation puts pressure on companies to offer the best product or service they can for the lowest price, as their customers can easily turn to their competitors.

Suppose you purchased a home security system from a company using an ownership model. If you wanted security cameras or a burglar alarm with cameras, you would need to pay a large amount upfront and hope they have a decent refund policy if you don’t like them.

Alternatively, if you bought your home security system from a company with a subscription-based service, you could more easily swap your camera system for other hardware like motion sensors. 

For example, Web-based services like Netflix have shown the business world that a subscription model can benefit both the business and the consumer for various reasons.

●    Subscriptions give consumers greater flexibility over the products and services they use. For example, if you wanted the best DIY smart home system possible, you could try out one provider for three months and then switch to a different provider if you discovered their hardware wasn't what you were looking for.

●    Low upfront costs mean customers can easily commit to a new product for a month or two without worrying too much about the financial cost.

●    Product or service obsolescence is a chronic problem no matter what you’re buying. Technology products become outdated at a rapid pace, which is annoying for consumers wanting to keep up as they have to continually buy new products rather than pay a monthly subscription fee and get whichever products they want.

More companies will try to offer a subscription-based payment option for their customers in the future.

This change to business operations will likely lead to a greater focus on what subscribers want in exchange for their monthly payments and greater competition between similar businesses.

Strong and continuous relationships between companies and their clients will lead to greater profits for businesses and better value and flexibility for customers.