1 April 2020

A new era of relationships in a subscribed world

The impact of COVID-19 has forced us into adapting a new normal. Companies and businesses will, in the same way, need to rapidly focus on getting back on track and grow back into this new economy, suddenly transformed by the pandemic.
Convergence of trends

The Subscription Economy, a phrase coined by Zuora, is made possible by technological innovations such as digitalization, big data, cloud computing, and the Internet of Things (IoT). Additionally, the shift in consumer preferences shows a decline in the value of ownership towards usership, and an increase towards convenience and affordable access to a wider range of products and services. Sustainability also plays a huge factor today, where we care more than ever about resource scarcity – consumers care about the impact they have on the environment and will lean towards eco-friendly products and services wherever possible. In a world where waste of resources and obsolescence are at the center of attention, products such as mobile phone upgrades through subscriptions or renting clothing and kitchen appliances are now more significant than ever.

The value proposition of a subscription model

On the contrary to one-time transactions, which usually sees the end to a customer relationship once the purchase is complete, a subscription model allows for the relationship to start when the transaction begins, at the time when the subscription is signed. A subscription model can be defined as a financial arrangement, an agile monetization of an offering, based on products and services, which allows the consumer to access and manage an array of choices. The underlying strategy of a subscription model is to keep customers for life, using key metrics such as retention rate and customer lifetime value. With network effects and member value derived from data collected, a subscription creates a long-lasting connection between both the consumer and the provider of the product or service offering.

A subscription model offers value to the user, as well as a recurring revenue and a predictable cash flow to the company.

Partnering with Zuora

We’re proud to announce our partnership with Zuora, the world’s leading provider of subscription billing, commerce and finance solutions.

“As an experience-led agency partner, we focus on delivering best-in-class experiences, well-aligned to Zuora’s focus on the customer. Our strong references in Direct to Consumer solutions (B2C and B2B2C) makes Zuora the perfect addition to our portfolio of services. Our transformational services support our clients in their migration towards a subscription business model. From strategic analysis to implementation and support, we have built a valuable partnership for every aspect of the implementation,” says Frédéric Demierre, Head of Salesforce and Commerce at Isobar Switzerland.

"We are delighted to have added Isobar Switzerland to our select set of partners - they are a forerunner in this territory with a strong agency differentiation thanks to their DTC, B2C and B2B2C solutions. Signing this partnership was a logical continuation to our long-standing relationship," says Philippe Van Hove, Area VP South EMEA & Central EMEA at Zuora Inc.

Companies launching a new product or service with a packaged price offering, looking to redesign their billing system, potentially following mergers and acquisitions (M&A), or expanding into new regions are likely to use Zuora’s subscription solutions thanks to their agile monetization of e-commerce, configure price and quote (CPQ) and reseller channels. Businesses looking for revenue automation who have complex business models and revenue calculations also show interest in Zuora’s agile monetization thanks to its subscription order management, workflows, rating, billing, revenue contract management, analytics, reporting, and many other features. Isobar Switzerland is proud to be part of the select set of partners of Zuora, recognized for its strong expertise in delivering Subscription-based solutions.

Industry insights

Netflix is one of the trailblazers who applied the subscription business model to digital technologies. Before Netflix, consumers were dependent on movie rentals or DVDs, which were one-off transactions with no recurring revenue. The aim of many businesses was to extract as much money as possible from a single transaction. Netflix provided its users with an all-you-can-eat model, including additional benefits such as ratings and recommendations through algorithms, which naturally attracted consumers to make the switch. Other consumer-related industries understood the value of this model and started offering services based on subscriptions too - examples of these include Salesforce, Amazon Prime, Nike Adventure Club, gym memberships, Spotify, home security and alarm systems, and many more. Some industries were born with or were early adopters of subscriptions, such as the media industry, who was particularly successful at offering such services for newspapers and magazines. Content digitization fostered the development of the subscription model, allowing to target subscribers around the world.

Today, many industries are turning to subscription-based services, depending on how far digitalization facilitates the implementation of such business models. Agility, innovation, data, and algorithms through artificial intelligence (AI) are key and must be mastered.

Industry-specific subscription business models

With the convergence of industries across Communication, Media and Entertainment, bundles and subscription services represent an opportunity to provide a broader and integrated range of services.

In the Retail industry, values such as trust, purpose and sustainability are at the core of customer loyalty. Digital-savvy customers are more demanding than ever and experience, as a brand differentiator, is key. Subscription business models in Retail can facilitate a wider range of offerings, taking into consideration the declining value of ownership. A subscription-based platform facilitates the implementation of usership business models.

Financial Services already include a part of subscription services in their business model but could find value in enlarging the range of services available to subscriptions. Open banking and with it the risk for disintermediation, makes it urgent to consider new business models.

Technology is moving into Healthcare rapidly, including a growing number of wearables, and digitally aware patients with new expectations. Services development around the 4Ps - Predictive, Preventive, Personalised and Participatory - can be facilitated through the development of a subscription-based business model.

The Manufacturing and Energy & Utilities industries can both foster opportunities, delivering smart and personalized services in several DTC models. Smart, connected products challenge traditional functions of business, transforming the value and supply chain. A subscription service, based on connected products that are sustainable, backed by IoT, data, 5G and AI, can unlock new business potential.

In the face of long-term school closures in the Education sector, due to the COVID-19, students and parents are forced to deal with remote learning and teaching. A subscription model can unlock online education programs, facilitate registrations to curriculums, courses and virtual classrooms, thanks to agile monetization and subscription order management.

Many Nongovernmental and Nonprofit Organizations are already proposing subscription-based donations. In the race for attention, differentiation is crucial, and subscriptions might help address donors’ expectations. Isobar Switzerland, together with Isobar Good, an entity dedicated to drive measurable social impact, can help you develop a personalized offering.

Any company can transition to a subscription-based business model.

Can you turn your product or service into something customers can use regularly and provides consistent value?

Our experts at Isobar Switzerland can support your business in developing and implementing a subscription-based business model, with specific skills in terms of functional change management and technical integration of the platform. Contact Frédéric Demierre, Head of Salesforce and Commerce, for more information on our offerings.