Subscription business models have become popular in a variety of industries over the last few decades.

Subscriptions to Netflix have supplanted DVD collections, and Spotify has supplanted CD shelves. And businesses  like Blue Apron, Dollar Shave Club, and Stitch Fix delivers everything from dinner to clothes directly to consumer's doors on a periodic schedule that they can "set and forget."

The subscription economy is rapidly expanding. Revenue among subscription businesses grew roughly 5x faster than both the retail sector and the S&P 500 from January 2012 through June 2019, according to data from Zuora.

Advancements in the technology infrastructure and several other elements are fueling the growth of the subscription ecosystem. Perhaps more significantly, the subscription model balances incentives on both sides of the equation, providing businesses with stability and recurring revenue while also providing consumers with affordability and convenience.

Subscription models have grown to include businesses where the "product" isn't a product at all, but service and the value they provide isn't ownership but access. Car subscription businesses, for instance, are allowing customers to hire cars for short journeys rather than buying one.

1. Home Service

Companies are looking into methods to turn everything from house repairs to tree removal into a subscription service in the home maintenance industry.

Super, which markets itself as "subscription care" for the home, is one such company. In exchange for a monthly subscription fee, Super acts as a superintendent for homeowners and providing on-call maintenance workers.

In this, Super wins the heart of its customers in the subscription service. One approach is through cost: members pay a monthly or annual subscription fee, and Super pays for home upkeep and repairs, such as a broken refrigerator or a faulty air conditioner, that would otherwise cost homeowners hundreds or even thousands of dollars.

Super also provides convenience to homes by removing the need to find and evaluate service providers individually, which may take a long time and be risky.

Although it's typical to think of the frequency of use as the key to a successful subscription service, the success of subscription models in the home maintenance industry highlights the importance of convenience. Even if you don't use the service regularly, the peace of mind that comes with knowing that a problem will be solved with minimal time and effort on your part is sometimes worth the price.

2. Professional Development and Education

For decades, returning to school for a continuing education course or an advanced degree meant going back to school. With the cost of higher education continuing to increase and student debt already at an all-time high, professionals, and employers are searching for new ways to educate and train their employees — and subscriptions are one option.

Workers are under increased pressure to update their skills in an increasingly global job market as the economy evolves at a faster rate.

According to a poll conducted by West Monroe Partners, 55% of respondents agreed that they need to master new technologies to stay competitive in their skillset. 24% of respondents in the survey said  “The competence required in my work is becoming more complex.”

Subscription to LinkedIn learning and other learning platforms has provided learners with a more focused learning experience with unique content at an economical rate.

It's no doubt LinkedIn is the biggest player in subscriptions for professional development. In 2015, LinkedIn purchased e-learning startup, Lynda, for $1.5 billion and rebranded it as LinkedIn Learning. LinkedIn Learners can now choose from over 15,000 expert-led “business, tech, and creative” courses for $19.99 to $29.99 each month.

LinkedIn also works directly with businesses to provide employees with LinkedIn Learning courses. According to the company's website, 78% of Fortune 100 organizations provide LinkedIn Learning.

Employee coaching platform Bravely, online educational platform Coursera (which now provides bachelor's degrees), and language learning apps like unicorn firm Duolingo, which offers a premium edition of its app for a monthly fee, are among the companies that offer learning-as-a-service.

Not all e-learning subscription platforms are focused on professional development. MasterClass customers can acquire a range of skills from renowned practitioners in their area for $15 per month. Classes include TV writing with Shonda Rhimes, culinary with Gordon Ramsay, and tennis with Serena Williams, in addition to career and business courses.

The expansion of the subscription model into professional development demonstrates how subscriptions work well in industries where customers require ongoing support.

Businesses must be able to train new staff regularly, and providing professional development opportunities for employees has been demonstrated to improve employee retention. Subscription has sustained this service so far.

3. Automobiles

A prominent tech journalist Kara Swisher published an op-ed in the New York Times proclaiming that “Owning a Car Will Soon Be as Quaint as Owning a Horse.”

The proof for this argument is steadily rising: in 2018, worldwide private car ownership fell for the first time. Car ownership is no longer a daily requirement for many individuals, as it once was.

Faced with this transition, automobile businesses are adopting the philosophy of "usership rather than ownership" to give subscribers all-in-one subscriptions that include insurance, roadside assistance, maintenance, and the car itself for a monthly cost.

The rise of subscription automobile services comes at a critical juncture in the automotive industry's evolution. One possible reason for the fall is cost: in 2019, the average price of a new car in the United States reached a record high of $37,401. Increased urbanization also plays a role, as more users, especially the younger generation, decide to live in cities with varieties of transportation options.

Car access, however, continues to be popular, and a rising number of automakers are using subscription models to accommodate that demand.

Zipcar was one of the first companies to do so. Zipcar, which was founded in 2000, allows users to reserve cars on demand for $7 per month plus an hourly rate.

Since then, automobile manufacturers have been experimenting with subscription models. Subscription-based versions have been adopted by Mercedes-Benz, BMW, Volvo, Jaguar Land Rover, Mercedes-Benz, Audi, and others OEMs. These programs can help businesses get unsold products off their shelves while also generating income. Piloting a subscription product can assist Automakers in fine-tuning their business models in preparation for the introduction of autonomous vehicles, which many in the industry predict to be deployed in proprietary fleets before being sold for personal ownership.

The automotive industry's migration to subscriptions exemplifies how the subscription business model is helping big enterprises to adapt to changing market conditions and customer needs.

Consumers aren't buying automobiles as frequently as they used to, so OEMs are adapting to engage with them in new ways.

The car industry's subscription pricing strategy exemplifies the power of all-in-one pricing. Almost all automobile firms adopting subscription models provide all-inclusive subscriptions, which bundle maintenance, insurance, roadside assistance, and access to the car itself into a single monthly payment, removing the need for customers to manage those components separately through third parties.

4. Health and Wellness

In the health and wellness industry, the concept of access rather than ownership is vital. Healthcare providers are considering Subscription services as a possible solution for lowering point-of-service costs and reducing the burden on individual physicians.

MDVIP is an example of a subscription-based healthcare model. MDVIP subscribers pay a single annual price, varying from $1,650 to $2,200, that covers preventative care and diagnostic tests, as well as several value-added services like meal planning, workout plans, and 24/7 physician availability.

MDVIP shows how a subscription model can alleviate challenges on both sides of a transaction.

A physician can make the same amount operating under a subscription model as they would working under a traditional one but seeing just around one-sixth the number of patients. For doctors, this means reducing caseloads while maintaining a profit margin. Patients benefit from more individualized care and lower upfront expenses because they pay over the course of the year rather than all at once at the time of service.

In the health and wellness market, subscription business models aren't confined to in-person medical services.

The purpose of a growing collection of software and services is to improve customer's physical and mental health.

Fitbit Premium, a paid subscription service, was launched in 2019 by the wearable tech company Fitbit. The program includes “advanced insights” that go beyond those offered to all device owners: counseling customized to common health concerns like diabetes and weight management, as well as health and wellness reports that participants can share with their doctor.

The sleep-tracking program Sleep Cycle uses a freemium approach, with essential capabilities such as intelligent wake-up and sleep analysis available for free, but advanced features such as sleep assistance, snore detection, and heart-rate tracking reserved for paying users.

Meditation app Headspace offers subscribers a full library of themed courses, as well as new daily meditations and sleep assistance, for $12.99/month or $69.99/year, down from its early pricing of $99.99. Employers have begun taking notice of Headspace as well: In January 2020, Starbucks announced that it would be adding Headspace subscriptions to its list of employee benefits.

Happify, a personalized program intended at boosting users' emotional health and happiness, is another subscription service focused on improving users' wellness. Happify's Health initiative, like Headspace's, is aiming for wider market penetration through employers.

Happify and Headspace’s moves into the workplace, are part of a bigger trend of health and wellness companies seeking access to huge groups of customers through employers. Reduced healthcare expenses, higher engagement and productivity, greater job satisfaction, and higher retention are all advantages of employee wellness programs, which are likely to appeal to employers trying to optimize their staff.

Subscription healthcare services demonstrate how a subscription business model can benefit both parties in a transaction. Patients receive more individualized, attentive treatment with subscription healthcare, such as MDVIP, while doctors have less frantic caseloads. Employees gain access to wellness treatments through programs like Headspace and Happify, while employers profit from a calmer and more focused workforce.

5. Airline

Travel agencies that use subscription models can provide a variety of value propositions: subscription models might reduce the cost of travel for frequent travelers, but the more appealing benefit may be the time savings.

For frequent business travelers who value their time, the prospect of decreased time spent at airports, for example, maybe enough to justify an expensive subscription

Surf Air promotes itself as California's "private air travel membership," promising unlimited flights on its own jets for $1,950 per month - claiming to be more efficient than commercial flights.

FlyLine, which focuses on saving customers money on tickets, is another business seeking to take the irritation out of air travel via a subscription service. FlyLine promises "exceptional flight deals you can't find anywhere else" for a $49.99 per year Basic subscription or $79.99 per year Premium subscription. Customers save an average of 10-15% on domestic multi-carrier bookings, and anywhere from 20-60% on foreign bookings, according to the business.

Surf Air and Flyline can also attempt to simplify choice by removing the need for loyal clients to search several websites or airlines for the best offers.

Subscription services are also being introduced by major commercial airlines, to increase customer retention and loyalty.

Delta launched SkyMiles Select in October 2019, a $59-per-year “travel benefits bundle” that includes advantages like drink coupons and priority boarding, as well as the assurance of guaranteed overhead bin space. The deal appears to be intended for “Average Joes and Average Janes” who fly a few times a year, according to one travel industry expert, to reward these travelers to keep choosing Delta for their flights.

United, JetBlue, and Southwest all have subscription plans that include amenities like priority boarding and access to overhead bins.

The growth of airline subscription services demonstrates that subscription models don't have to be just about saving money before they can be appealing. Comfort and convenience — can carry as much significance with customers.

6. Gaming

GameSpot tagged 2019 the “Year of Subscriptions” for the video game industry.  With the advancement of broadband connectivity and streaming technology, millions of gamers have begun to use subscription services, paying a monthly price for access to a range of games rather than purchasing them individually.

Owning a video game makes less and less sense in a digital ecosystem: when games are purchased and streamed over the internet, there is no tangible object to possess in the first place. Subscriptions can provide players with diversity and novelty while helping publishers retain control over platforms.

Early fears that transitioning Gaming into a subscription model would reduce the amount of time spent playing particular games were unwarranted. According to The Gamer, subscribers spend four times as much time, three times as much money, and play 2.5 times as many games as non-subscription players.

Smaller publishers and independent game makers have profited the most from the approach, as subscribers are more inclined to try a new game that they would not have purchased otherwise.

In the last three years, the majority of video game console creators have announced subscription services:

• Subscribers to EA Access get early access to games and a 10% discount on purchases. According to estimates, EA access has 5 million subscribers across PC, Xbox One, and PlayStation 4.

• For $9.99 per month or $59.99 per year, PlayStation Now offers a library of 650 games. At the end of October 2019, Sony placed PlayStation Now’s subscriber count at 1 million users, up from 700,000 just six months before.

• For $10 per month, Xbox Game Pass customers get access to over 100 games. Since the service's introduction in 2017, Microsoft has not published total subscriber counts, however, some reports place monthly gamers as high as 9.5 million, accounting for 30% of total Xbox income.

Even huge tech companies that aren't known for gaming are getting in on the act. Apple Arcade was launched in September 2019 by Apple as its gaming subscription, which is can only be played on Apple hardware. It offers a catalog almost completely made up of unique games.

Google Play Pass, which costs $4.99 a month and gives customers access to 350+ games, was launched the same month by Google.

The success of subscription business models in gaming demonstrates what powerful value propositions selection and variety are to consumers. The appeal of being able to find and test out a range of games without having to spend the money to buy them all separately is exactly where the subscription model comes into play.

What we learn from the expanding Subscription Ecosystem

Businesses in the aforementioned areas who have found success with subscription models have tapped into subscription economy concepts that go far beyond price. Here are a few of the most essential lessons we may learn from them:

• Reclaim or re-engage customers: As seen in the examples above, adopting a subscription model can help reclaim or re-engage customers who have strayed from the fold, or enhance engagement when an audience is flagging.

• Subscriptions are being used by car companies to keep drivers, if not owners, and used by game developers to extend payership for their games, even if they no longer own them outright.

• If you're worried about younger customers leaving your business, experimenting with a subscription model as a way to reduce commitment might be worth a shot.

• Businesses are finding success in several of the areas listed above by employing the subscription model to balance the interests of many stakeholders: employers and employees, healthcare providers and patients, and gamers and game developers. It's interesting thinking about what other industries have a similar balance to strike.

• The exchange of value is obvious in product-based subscription businesses, as well as in the traditional buy-sell paradigm. You pay money, get the product, but we've learned that not all value is obvious. That dynamic isn't necessarily that clear in the service-based subscription economy.

• As the use of subscriptions for home repair, air travel, and video games has demonstrated, sometimes just knowing that the service is available is worth the subscription fee. Each of these companies guarantees service in addition to a higher-order practical or psychological benefit, such as reducing time with air travel, removing the effort and responsibility of owning a car or delivering a wider range of items, and so on.

The subscription economy is expanding, and the possibilities it offers aren't restricted to SaaS and subscription boxes. As the subscription economy's concept spreads to other industries, we should expect to see even more unexpected verticals adopt service subscription models from now on. If you’re not sure subscription is right for your business, you can contact the Chargezen support team for a free consultation or write me at success@trychargezen.com.

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