ANZ companies embracing subscription model

With hugely successful subscription services such as Netflix demonstrating the feasibility of the subscription model, Australian and Kiwi businesses are looking to get in on the act, new research shows.

More than 70% of local enterprises in industries such as media, health care and software are looking to adopt a recurring subscription model over the next two years, according to a survey of 100 companies conducted by Ovum for business management solution provider Zuora.

The research found that while just 8% of businesses surveyed had a subscription billing system, 65% were planning to spend an average of more than $500,000 over five years to deploy such a system.

Other segments covered by the survey include IoT-based companies as well as cloud storage, apps and infrastructure providers.

The research also indicates that Australian consumers are embracing the subscription model in greater numbers. While 75% of Generation Z have been making use of subscriptions for more than two years, there has been a recent surge in adoption among Generation Y — aged 26–35 — as well as those aged 71 and up.

Nearly a third (32%) of existing subscription customers are new users who have been utilising subscription services for less than 12 months.

But Zuora Managing Director John Kearney said Australian businesses have been relatively slower to embrace subscription or hybrid customer engagement models compared to their peers in the US and Europe.

“In the ANZ region, media and entertainment contribute more than one-third (38%) of total subscription revenue, but we’re beginning to see strong growth from software-as-a-service (SaaS) companies plus emerging subscriptions-based business within health, education and financial services,” he said.

Kearney said moving to a subscription model requires a focus on simplicity as well as putting the customer first.

“Big business has to be on top of pricing and packaging as a strategy to secure market share. Learning from the media industry, including leaders like Fairfax, and from many others around the world, simplicity is going to be key, particularly for the business-to-consumer space.”

Image courtesy of Jenny Cestnik under CC