Subscribed | Tien Tzuo

Summary of: Subscribed: Why the Subscription Model Will Be Your Company’s Future—and What to Do About It
By: Tien Tzuo

Introduction

Welcome to the enticing world of a subscription-based business model, an essential shift for modern companies to thrive. With remarkable examples such as Spotify, Uber, and Netflix, you’ll discover how the focus of these businesses is on access and service, rather than owning products. People value the convenience of using services more than owning physical products. Unveil the secret to the rise of these powerful companies and learn how customer-oriented subscription models can save many businesses from sinking. Will your company be among the survivors as the world moves toward a subscription-based economy?

Subscriptions: The Future of Business

In a world where consumer attitudes have shifted from owning products to accessing services, businesses that want to succeed must follow suit. Subscription-based business models are increasingly vital for companies to survive says Tien Tzuo, author of an article for Fortune in 2015. Customers pay a subscription fee to access services via companies such as Spotify, Uber, or Netflix. Subscriptions offer two distinct advantages, access, and service. Companies that listen to their customer’s needs and tailor products accordingly can provide better service. Subscription services offer a valuable default for businesses looking for a way to adapt to changing attitudes. General Electric and IBM are two examples of companies embracing subscriptions. Their flexibility and adaptability led them to survive and prosper for more than half a century.

The Rise of Subscription Services

The internet and file-sharing sites like Napster brought about the growth of subscription access to music and video. Despite legal challenges from big film studios and record labels, start-ups such as Netflix and Spotify quickly capitalized on this new market and ascended to the top. The rise of streaming services also boosted retail sales and ecommerce, which now accounts for 13% of the total retail market. Amazon, with its 90 million US Prime members, has an advantage in data retention and can tailor their service to individuals, making shopping a personal experience. The success of subscription services has transformed the way people consume media and shop online, leading to the closure of physical stores and a significant shift in the retail market.

Revolutionizing Travel and News

The industries of travel and news are undergoing significant transformations due to the rise of subscription models. Companies such as Uber and Lyft are impacting the transport industry, while newspapers continue to thrive in the digital age due to their ability to inspire reader loyalty. Additionally, Surf Air provides an unlimited number of flights for a monthly fee, and high-end carmakers like Porsche are offering car access for around $2,000 a month. While many Americans are no longer owning a car, over 169 million Americans continue to read newspapers every month, with 18% of 20-24-year-olds subscribing to online news services. The subscription model continues to show that readers prioritize quality over shoddy free content, whether they are reading the news or traveling.

The Fish Principle

This book discusses how companies can transition to a subscription-based model for their products or services by embracing the “fish principle.” The fish principle is the dip in revenue and increase in costs that occur during the transition period. Adobe successfully underwent this transition in 2011 and saw long-term gains. The manufacturing industry can also benefit from this model by using the Internet of Things (IoT) to offer subscription-based services that continually monitor and update products in real-time. The IoT has the potential to become the ultimate as-a-service business, providing improvements for customers and generating long-term gains for suppliers.

Agile Development and Subscription Models

The business model of subscription services has revolutionized the way companies approach innovation. Unlike traditional linear processes, subscription-based models focus on continuous growth and adaptability through customer collaboration and a constant stream of data. This new approach, known as agile development, prioritizes the changing needs of customers over rigid adherence to plans. Customer feedback is used to tweak and improve products constantly, making them more responsive and adaptable to the market. With companies such as Google and even musician Kanye West embracing this approach, agile development and subscription models are changing the game in product innovation.

Marketing in Subscription-Based Models

In this excerpt, the author explains the traditional marketing strategy which revolves around the four Ps (product, price, promotion, and place) and push-and-pull factors. However, the marketing approach changes when replacing “product” with “subscription.” The author argues that in subscription-based models, customer service is essential, storytelling should be the focus of promotion, and pricing should involve tiered systems. The author uses examples from companies like Autodesk, Dropbox, and Spotify to emphasize the importance of these changes.

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