The subscription economy: an ongoing revolution transforming global business

The subscription economy is experiencing an unprecedented period of major transformation. This silent revolution is redefining how companies generate revenue and how consumers access products and services.

In recent years, we've observed a growing interest from companies to launch their own subscription offerings. This trend is accelerating as leaders discover the strategic advantages of this business model.

Despite strong attraction to the subscription-based business model, this transformation has not yet reached its peak. Experts predict an explosion of this model in the coming years, with massive adoption in sectors still unexplored.

Exceptional economic performance that speaks for itself

Companies based on the subscription model are also experiencing faster growth than traditional companies. This superiority is not anecdotal, it is measured in concrete data.

Indeed, in the USA, between 2013 and 2019, subscription company revenues grew five times faster than the average S&P 500 company. This remarkable performance illustrates the power of the recurring model.

Even the health crisis related to Covid-19 did not halt this ascent, quite the contrary. Companies are increasingly turning to this business model that responds to changes in consumption patterns accelerated by the pandemic.

Successive lockdowns reinforced the appeal of subscription services, creating new usage patterns and lasting consumption habits.

The three pillars of subscription economy success

This evolution is explained by three major advantages that fundamentally transform the commercial relationship:

• Increased customer loyalty through long-term commitment
• Recurring and predictable revenues that secure cash flow
• Transformed customer relationship towards a long-term partnership

A paradigm shift on the consumer side

Indeed, consumers prefer subscription models due to their unmatched flexibility and constant accessibility. This preference is explained by several behavioral and economic factors.

Access now takes precedence over ownership, particularly among new generations. Consumers value the possibility to try, change, and adapt their choices according to their evolving needs.

The financial dimension also plays a crucial role: subscription allows for cost spreading and reduces initial investment, making products or services otherwise out of reach accessible.

The strategic pivot of traditional companies

In recent years, the subscription industry has also developed because more and more companies are pivoting towards a subscription-based business model.

The objective is clear: generate more stable, higher-margin, and more predictable revenues. This strategic transformation often requires a complete overhaul of internal processes and company culture.

Companies that successfully make this transition quickly discover the benefits of a deep customer relationship and long-term financial visibility.

The subscription industry doesn't know crisis

Sustained growth despite economic instability

In recent years, on average, subscription company revenues have increased by nearly 10% year over year. This remarkable performance occurs in an economic context marked by numerous uncertainties.

Despite market uncertainties that the global pandemic brought, consumers did not turn away from subscription offerings, on the contrary. The business model based on recurrence demonstrated its ability to maintain customer engagement even in the most difficult periods.

The Covid-19 test: a successful resistance test

During the Covid-19 crisis, revenues of companies commercializing subscriptions remained stable, or even increased for 20% of them. This performance contrasts sharply with the difficulties encountered by traditional business models.

In a way, Covid-19 will undoubtedly contribute positively to the development of the subscription economy for years to come. The crisis accelerated the adoption of new lasting consumption behaviors.

Key factors of this resilience

This is partly due to a strengthened customer relationship in this type of model: occasional crises do not call into question a long-term relationship that a company can have with its subscribers.

The structural advantages of the subscription model include:

• Revenue predictability: recurring and plannable financial flows
• Reinforced loyalty: long-term customer commitment
• Adaptability: ability to adjust offerings according to evolving needs
• Reduced acquisition costs: amortization over customer lifetime

Promising future prospects

This proven resilience of the model should lead to robust growth in the subscription economy over the coming years. Sectoral data confirms this trend with sustained growth projections.

Industry experts predict that companies that have already partially switched to subscription models will double their performance. This transformation is often accompanied by internal process optimization and better understanding of customer needs.

At the same time, many "traditional" companies will turn to this business model that has demonstrated its solidity and robustness. This transition is particularly observed in sectors traditionally based on one-time sales, which are discovering the advantages of recurrence.

Period	Subscription company performance	Traditional companies
Pre-Covid	Average growth of 10% per year	Variable growth by sector
During Covid	80% stable, 20% growing	Majority struggling
Post-Covid	Projections of doubled performance	Progressive and uncertain recovery

Why are consumers keen on subscription offerings?

The subscription market is experiencing exceptional growth, driven by massive consumer adoption. This trend reveals a fundamental change in consumption habits.

With a growing number of consumers adopting the subscription model and new operators entering the category, the subscription market still has a lot of room to develop.

The numbers speak for themselves: 45% of buyers have a subscription adoption rate of one per year. This statistic reveals the scale of the phenomenon.

The distribution of adoption behaviors shows interesting diversity:

• 28% purchase two to five new subscriptions per year
• 15% sign up for at least one new recurring service each month

The explosion of subscriptions during the crisis

According to a survey conducted in March and April 2020, for certain sectors commercializing subscription services, growth was double-digit:

Sector	Growth during crisis	Business impact
Streaming entertainment	+64%	Explosion of VOD platforms
SaaS software	+49%	Accelerated digitalization of companies
Cloud services	+21%	Massive migration to remote work
Online training	+19%	Retraining and skill development
Online press and blogs	+14%	Need for reliable information

This exceptional growth demonstrates the resilience of the subscription model in the face of economic crises. Rental and second-hand sectors also benefited from this trend, with consumers favoring access over ownership.

What motivates consumers to subscribe to a subscription service?

Consumer motivations reveal three fundamental pillars that explain the success of the subscription model.

Economics as the main driver: For 46% of consumers, subscribing to a subscription service allows them to save money. This economic perception is explained by several factors:

• Cost spreading over time
• Access to premium services at reduced prices
• Avoiding high acquisition costs

Time savings, a competitive advantage: For 28% of users, subscription also means time savings. This added value translates into:

• Automation of recurring purchases
• Progressive personalization of the offering
• Elimination of repetitive search processes

The promise of a superior experience: Interesting fact: for 20% of buyers, subscribing to a subscription service is a promise to get a better product or service.

Indeed, this response reflects a better user experience within a subscription contract framework. Companies invest more in long-term customer relationships, creating a virtuous circle of satisfaction.

What are the determining criteria in subscribing to a subscription offering?

Flexibility is a key factor for subscriptions: consumers appreciate subscription contracts with multiple options. This flexibility requirement reflects a generational change in the approach to contractual commitment.

The three priority criteria for consumers:

1. Freedom to cancel

• 79% of consumers seek the ability to cancel at any time
• This flexibility when purchasing a new subscription has become non-negotiable
• Forced commitment is perceived as a major barrier to subscription

2. Diversified payment options

• 73% of them check if their preferred payment method is available
• Diversity of payment methods (card, transfer, digital wallet) is crucial
• Adaptation to local payment habits becomes a competitive advantage

3. Free trial period

• 70% of consumers want to try before buying
• Free trial reduces perceived risk and facilitates conversion
• This period allows evaluation of the service's real value

What are the preferred billing methods?

Billing preferences reveal surprising insights into subscription consumer behavior.

Annual billing favored: Surprisingly, 46% of consumers prefer an annual billing cycle. This preference is explained by several factors:

• Substantial discounts offered on annual subscriptions
• Simplification of personal budget management
• Avoiding monthly micro-transactions

This is good news for subscription companies as it allows them greater revenue predictability. This financial stability facilitates:

• Investment planning
• Continuous service improvement
• Supplier negotiations

Monthly billing remains significant: 34% prefer monthly billing, mainly for:

• Better control of monthly budget
• Ability to test the service over a short period
• Adaptation to irregular income

Billing cycle	Percentage	Consumer advantages	Company advantages
Annual	46%	Savings, simplicity	Predictability, cash flow
Monthly	34%	Flexibility, control	Easier acquisition
Others	20%	Customization	Differentiation

Strategic implications for your business: This distribution of preferences suggests that a multi-cycle approach can maximize customer acquisition. High-performing companies typically offer:

• A free trial to reduce friction
• A monthly subscription for acquisition
• An annual subscription with discount for retention
• Pause or resume options for flexibility

How to set up your own subscription offering? Do you need guidance in your strategic thinking? Contact us!

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* Nasdaq, June 2020.
** 2Checkout survey conducted in March-April 2020 globally with 415 respondents from over 50 countries worldwide