I spoke with Tien Tzuo, CEO of the subscription management company Zuora, the this week’s podcast. After the conversation I started to think about what it would mean to end the property economy, as he called it. The idea that we’ll go from buying and owning a product to paying for access to a monthly subscription (or based on usage) is a hard sell for many.
Yet consumers expect this to happen in the future. In our recent Stacey IoT audience survey, over 20% of respondents said they already have some sort of IoT-related subscription service. Almost a quarter of those who do not yet have a subscription think they will add one this year. Many of these subscriptions enhance the value of existing hardware, and others are product subscriptions instead of paying the full upfront cost of the devices.
The business world wants to drive people towards a subscription model for a number of reasons, but it’s not always clear what consumers will get out of this change and what they might give up. So I’ve put together a list of things that I think every good subscription should include. If a business wants me to pay a monthly subscription for a device, or pay every time I use it, they need to provide a service designed for my benefit, not just because it makes sense for the bottom line. ‘business. Here are some of the things I am looking for.
Convenience – If I choose to buy a subscription, it’s probably because I want the convenience in some way and I’m willing to pay extra for it. For example, I once wrote about a company that offered a dog food subscription and a smart food spoon. The company ended up throwing the scoop, but the overall idea was good. Users would pay for the convenience of knowing their dog was fed every day and for the automatic replenishment of food before it ran out. If we want to think about turning an asset into a subscription, the June oven offers a fun thinking experience. I purchased the oven and currently have the option of subscribing to a recipe service. Go further. I could see June providing a food delivery service that takes the anxiety out of preparing meals by shipping or delivering from my local grocery store the food I need for a week of meals that can be assembled and cooked automatically at the store. oven. At this point, the oven isn’t the primary focus, it’s the convenience of having a service that takes over the meal planning, part of the prep, and all of the cooking with my hands.
Continuous improvement – In the interview, Tzuo made a good point about how subscription companies are innovating. They range from the goal of creating great success from the start to continuous product improvement over time. When you have the software and enough hardware, it is possible to update the functionality of a connected device with each update.
Managed maintenance – It’s all about convenience, but if you buy a service instead of owning an asset, you expect the actual owner of the asset to resolve issues when they arise. One of the most valuable things about renting is that when something breaks you call someone and they fix it. My friend just failed his smart door lock. If he was buying Access as a service for his home or if the lock was part of a security service, he might have avoided the problem of replacing it himself when his service provider sent someone in. one to repair or replace the failed lock. If I had subscribed to my June oven (see above), I would have expected the company to fix the handle when it broke a few months ago.
Replace and recycle – Some companies are already doing this today, but managing a product throughout its lifecycle is an essential added value in moving to a subscription model. I would pay dearly to avoid having to throw away a device when it inevitably stops working. Any business that wants to turn physical assets into a service needs to think about the physical embodiment of the asset, including how to replace it when necessary and take responsibility when it reaches the end of its useful life. As Tzuo explained in the podcast, these companies have the scale and resources that consumers simply don’t have, making lifecycle management of physical assets plausible.
Initial accounting – When you buy something on credit, you get a statement showing how much you will pay over the life of the loan for that particular item. It took years for this information to be transparent to the consumer. As we move to more services, I think a clear and easy-to-understand initial disclosure of costs and any other expectations associated with each service is essential. After all, one of the great things about memberships is that you don’t have to shell out so much money up front. But how much will we pay for these services over time?
Obviously, consumers will have to pay for some of the convenience and added value that they don’t get when they buy a product directly. Human resource costs will be an issue for many companies trying to develop these models. Much of the real value will be provided by convenience, and that convenience requires people to handle physical products on the spot.
Sure, IoT can help anticipate issues and effectively plan people, but ultimately a service with a physical component will need people to install, maintain, and replace it over time. time. Wrapping up personnel costs in a subscription and explaining this cost to consumers will be difficult.
There is still a lot to say on this topic, and I don’t think we’ll be nearing the end of the property anytime soon. I think we’ll see connected products delivered as a service, but I think those services will be bigger than just a doorbell or a single kitchen appliance. These will take time and standards to develop. And not everyone will buy this model.
Listen to this week’s podcast for more thoughts on subscriptions.