Subscription Models: How to Successfully Retain Customers and Boost Your Sales [5 Reading Tips]

Digital champions focus on traditional virtues and keep a close eye on their further development. A diverse marketing mix, i.e. all measures designed to achieve marketing goals, is one of these virtues. Product policy in the marketing mix describes which products and services a company wants to offer and how they appear on the market.

However, customers no longer just buy products. They buy experiences – and emotions. That is why it is companies’ business models that have changed rather than the products themselves. A prominent example of this is the subscription economy.

Subscription Models: Experience Beats Price

Thanks to digital tools and platforms, companies can tailor their product and service offerings to their customers’ needs. Innovative companies reflect how consumer needs and behaviours have changed. In the subscription economy, this shift from product-centric approaches to customer-centric approaches is crucial.

Only 25 per cent of all subscribers choose their subscription based on price, while more than 50 per cent of users prefer subscriptions that give them more freedom and a wide variety of options, for example subscription upgrades or convenient billing.

Amazon, Spotify and Netflix are prime examples of a successful subscription economy. Thanks to cloud computing, this business model is booming – clouds are becoming increasingly efficient and visibly more attractive for small and medium-sized enterprises as well.

Between 2007 and 2012, Adobe saw its sales plummet because it sold its software on CD. Since switching to a digital subscription model, however, the company has been doing better than ever – and not only that: Adobe is even considered one of the pioneers of the subscription economy in the software industry.

Subscription Models: Best Practices

Fender’s Video Subscription Service

The legendary guitar company Fender had the problem that up to 90 per cent of new customers lost interest in playing the guitar within the first year and returned their instrument. To counteract this, Fender began offering a video subscription service that featured lessons for aspiring guitarists.

Not only did this improve the experience with the instrument, but it also strengthened loyalty to the brand. This allowed Fender to reach its customers on the level of emotion as well as expertise. The number of returns decreased.

Caterpillar’s Predictive Service

A similar development can be observed in B2B. The construction equipment manufacturer Caterpillar is a prominent example here. In the past, the company often had problems with managing the maintenance of its customers’ machines.

That is why it created an analytics service called Cat Connect Solutions, which acts as a monitoring system that analyses usage patterns and provides timely information on when maintenance needs to be carried out.

Since then, the company has seen itself not only as an equipment manufacturer, but also as an equipment manager that supports customers over an agreed period of time and retains them even more effectively.