Ownership vs Subscription: Which is better for Customer Experience?
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Ownership vs Subscription: Which is better for Customer Experience?

Since the Industrial Revolution, there has been an exponential growth of capitalism, and it was the ownership of assets that reflected success in life. Owning a house or a car would be comparable to a coming-of-age experience, and ownership of luxuries such as air-conditioning would consolidate a superior social standing. But with the arrival of Gen Z, there has been a major shift in consumer mentality and behavior.

This shift in consumerism has come with the onset of online marketplaces and the trend in millennials to opt for on-demand products and services which offer flexibility, as opposed to the security of ownership. Coupled with the rising demand for personalization at every level, industries have had to adapt to this new business model to accommodate this new demographic and provide the best customer experience possible.

Rise of the Subscription Economy

Netflix started as a DVD rental service in 1998, right after the introduction of the DVD format the previous year. But evolving with the ever-changing tastes and preferences of their target demographic, they currently have over 203 million paid subscribers across the globe, generating over $24 billion in the last year.

Netflix Usage

Due to the unprecedented COVID-19 lockdown, businesses across the globe shut down, but Netflix received 16 million new subscribers in just the first three months of 2020.

Pandemic has clearly affected consumer behavior and many predictive models ceased to work, but it has definitely favored the Subscription Economy, with the latest SEI suggesting 11.6% annual revenue growth.

Whether you operate an ownership-based company or a subscription-based one, you can always take the advantage of making better-informed decisions that will impact the long-term growth of your company, by leveraging meta-analysis of data.


Ownership: Purchase-based Business Model

This is the traditional business model where a single purchase involves a transaction between the consumer and the seller, after which the consumer owns the product permanently.

The consumer now owns the product without the requirement of further payments, but will still have to bear expenses for maintaining or upgrading the said product.

Once you purchase a car, you don’t need to pay further for ownership and have the vehicle at your disposal, but there will always be the cost of fuel, maintenance, and repairs.

Paid-Access: Subscription-based Business Model

This business model involves the consumer receiving products or services based on weekly, monthly or annual transactions, only as long as the consumer continues to invest in regular installments.

The consumer does not enjoy the same position as that of an owner, as they choose to invest in smaller installments to receive the benefits for a temporary period.

Most of Gen Z is not interested in going through the trouble of saving up, buying a car and maintaining it, when they can simply hail an Uber and make a one-time payment for when the services were needed.


Customer vs Subscriber

Customer experience is paramount for every company and it involves every facet of the company’s offering; from advertising and packaging to reliability and last but not least, quality customer care. But the best customer experience can only be provided once you as a company can identify your business model correctly and have a clear understanding of how the different elements of your business combine to generate value for your customers.

What is Subscription

A comprehensive understanding of your business model is essential for deciding whether your offerings cater to subscribers or customers.

What Is a Customer?

A customer is quite simply an individual who purchases products or services from another individual or company, generating revenue and enabling the individual or company to continue its business. It is the company that has to then understand consumer behavior to tailor the retail experience, ensure customer satisfaction and customer retention, enhancing the business as a whole.

What Is a Subscriber?

A subscriber is a just subcategory of a traditional customer, but the subscriber does not have permanent ownership of the product or service. The subscriber makes payments in installments to enjoy the benefits of the products or services provided and can discontinue payment whenever needed. It is the company’s responsibility to offer the best customer experience possible, personalized being preferable, so that there is customer retention through subscription renewals.


Understanding Which Is Best for Your Consumers

Purchase-based Business Model

To understand which business model is best for your consumers, you have to become a data-driven business. Data collection and analysis are quintessential to developing consumer profiles and consumer segments, which in turn will help generate targeted marketing campaigns based on consumer preferences. Analytics is at the heart of these, leveraging actionable insights to make informed business decisions in real-time, enhancing consumer engagement.

Cohort Analysis

Data collection means nothing if you don’t have the means to leverage the data for insights that can help you boost business operations and customer experience. Most small to medium businesses do not succeed with their marketing efforts and sales strategies; because they do not have the time to analyze the data or they are hung up on “vanity metrics” that add no value and are mostly misleading. Cohort analysis, which is a feature of Digital Engineering, is the solution to these problems.

Customer Cohort Analysis enables you to automate the analysis of all your data, which gets broken down into segments of consumers with common characteristics (such as acquisition date). Each subset is called a cohort, and ‘cohort analysis’ enables you to have a comprehensive comparison of the metrics and behaviors of various cohorts over a period of time. You can easily isolate factors driving performance up or down, the impact of marketing efforts and as a result identify factors of campaigns that boost sales, to carry out targeted campaigns. These personalized campaigns increase conversions through a better customer experience.

CX Analytics

Consumers of today are interested in having an enjoyable retail experience, even if they are purchasing household items. This is where you have to ensure that when the consumers engage with your company, they have a unique yet seamless experience that will ensure customer retention. Customer Experience Analytics thus becomes an indispensable element when trying to deliver the very best experience to potential consumers. Once you have access to actionable insights on individual consumers, you are free to determine the best business model suited for your enterprise and offer personalized retail experiences tailored for the consumer and their preferences.

Continually Test and Retool Processes

Continual A/B testing helps get a better understanding of the consumer and the success of the existing business model which can now be fine-tuned to optimize customer experience.

You can also leverage Multi-touch Attribution, an AI tool used to generate predictive models and sales forecasts, enabling you to recalibrate the business model in real-time to offer optimally personalized experiences, improve engagement and maximize conversion. Once you know the tastes and preferences of your consumer base, you can adjust your business model to suit the requirement and boost customer experience.

Respond to Feedback

Last but not the least, receiving and responding to customer feedback is the simplest way to be informed about the consumer’s experience and figure out how that experience can be enhanced to improve retention and future conversions.

Whether your business caters to customers or subscribers, it is always advisable to understand your business model through an understanding of your clientele, as both influence one another and are at the heart of being able to provide the best customer experience possible.