Subscribed

The future of business lies not in selling products, but in creating reliable and ongoing relationships with customers through subscription services.

1. The Shift from Ownership to Access

The way people engage with products and services has evolved dramatically. Customers are less interested in owning items and more interested in accessing what they need when they need it. Companies like Spotify, Netflix, and Uber exemplify this trend by offering access to services instead of selling physical products. This focus on access simplifies life for users, fulfilling their needs without the burdens of ownership.

As Tien Tzuo highlights, customers care about the "milk, not the cow." They want the value the product provides rather than the product itself. This shift in consumer behavior aligns with broader trends such as urbanization and the desire for flexibility in how people live and consume. By focusing more on accessibility and less on products, companies can meet modern demands effectively.

Many legacy companies like General Electric and IBM have successfully redefined themselves through subscription strategies. General Electric transitioned from manufacturing to digital services, while IBM moved from hardware to IT and business subscriptions. Those that failed to adapt faded into obscurity.

Examples

• Spotify grew to 500 million subscribers in less than a decade using a music-as-a-service model.
• General Electric shifted its revenue base to digital subscription services like data analytics.
• The percentage of Americans between 20–24 with driver’s licenses dropped significantly, driven by access to ridesharing services like Uber.

2. Subscriptions Are Reshaping Entertainment and Retail

The rise of subscription services in video, music, and shopping has fundamentally transformed consumer habits. With services like Spotify and Netflix, people can now watch and listen to their favorite content anywhere, anytime. Similarly, online retailers like Amazon have harnessed subscriptions to build loyalty and streamline shopping experiences.

The internet, especially platforms like Napster, opened the door to accessible streaming models. While initial resistance from traditional industry players slowed progress, new companies saw the opportunities. Netflix, for instance, went from shipping DVDs to hosting a thriving digital library. Meanwhile, Spotify catered to growing global music consumption, significantly boosting music industry revenues.

Retail has also embraced this shift through ecommerce. Amazon Prime, for example, doesn’t just provide faster delivery but also integrates added perks, such as video streaming and exclusive deals, deepening customer relationships and engagement.

Examples

• Netflix grew its subscriber base to over 100 million within a decade.
• Spotify contributed 20% of global music revenue in addition to building a user base of 500 million.
• Amazon boasts over 90 million Prime members in the US, accounting for $9 billion in annual subscription fees.

3. News and Travel Industries Are Adapting

Traditional industries like media and transportation have reinvented themselves through subscription models. Newspapers, once feared to be on the verge of extinction, have used subscriptions to revamp their businesses. Meanwhile, transportation providers are easing access to travel rather than focusing on selling cars or plane tickets.

The arrival of ride-sharing companies like Uber has restructured the mindset around vehicle ownership, making convenience a priority. In the aviation sector, services such as Surf Air reflect this thinking by offering subscription-based unlimited flights, replacing the laborious need for ticket purchases each time.

Newspapers have leaned into digital flexibility while capitalizing on their original subscription foundations. Free clickbait content dominated the internet for years, but outlets like the Financial Times and New York Times used the promise of quality journalism to win back paying subscribers.

Examples

• Surf Air provides private jet services through monthly subscriptions.
• The Financial Times saw a 600% jump in digital subscriptions during a targeted campaign in a significant news cycle.
• Uber has drawn millions into ride-hailing services, reducing the need for car ownership among young Americans.

4. Transition Periods Can Be Tough

Switching to a subscription-based model isn’t easy, particularly for established businesses. Companies often face a temporary drop in revenue before reaping long-term gains. Tien Tzuo calls this phenomenon “swallowing the fish,” a reference to a graph depicting a revenue dip followed by sustained growth.

Adobe successfully went through this challenge when it transitioned from selling physical software to cloud subscriptions. Initially, its profits sank as it restructured its business model. However, as users acclimated and found value in its consistent updates, Adobe’s recurring revenue skyrocketed.

Manufacturing businesses are facing similar pressure. By embracing smarter connectivity through IoT (Internet of Things), this typically slow-moving sector aims to stay relevant. Think of smart products continuing to log data and incorporating updates long after leaving the factory.

Examples

• Adobe shifted entirely to subscription-based software in 2011, with stocks rising from $25 to $195 within years.
• IoT advancements mean billions of smart devices – from cars to appliances – will enable data-driven services by 2020.
• Traditional manufacturers are aligning themselves with IoT trends by embedding connectivity sensors into physical products.

5. Innovation Is Now a Continuous Loop

Unlike traditional product creation cycles, which end once the product reaches the customer, subscriptions thrive on iterative improvement. This agile model emphasizes continuous updates and adjustments based on user feedback. Companies that embrace customer-driven development can stay both competitive and relevant.

Software developers championed agile approaches in 2001, advocating for more flexible and adaptive product design. Instead of sticking rigidly to original plans, companies must let customer behavior shape their future offerings. Iterative refinement ensures products grow with their users.

Kanye West even embraced this ethos in music. After releasing The Life of Pablo, he kept refining tracks post-release, viewing his album as an ongoing, customer-driven product.

Examples

• Gmail operated in "beta" mode for five years after its launch to continuously evolve.
• Agile practices proved to be the defining new development standard in software industries.
• Kanye West experimented with this agile concept, editing and reworking his album post-release based on fan input.

6. Rethinking Marketing in a Subscription World

Subscription models rewrite marketing rules. Instead of focusing just on selling products, companies now look to highlight ongoing value and foster long-term relationships with customers.

Traditional push-and-pull methods—such as relying on product placements or aggressive ad campaigns—don’t work well for subscriptions. Instead, promoting emotional connection through storytelling and focusing on customer engagement takes center stage. Companies must redefine their customer narratives.

This model focuses on creating user tiers to allow customers to opt into premium levels of service. This builds trust and invites users to grow with the brand, increasing market retention.

Examples

• Dropbox employs tiered pricing to cater to casual and professional users.
• Autodesk teaches retailers maintenance routines to keep its software relevant to user needs.
• Zuora markets itself by explaining "why" subscription services are redefining industries.

7. Customer Relationships Take Priority in Sales

One-time transactions no longer suffice. Businesses must continuously cultivate loyal subscribers, emphasizing steady engagement and incremental improvement rather than single-point sales.

This requires addressing customer churn rates. By providing real value and tackling churn proactively, companies can secure relationships for the long haul. Strategies like upselling and cross-selling also create opportunities for deeper investment by customers.

Focusing on international growth is equally important. Expanding into global markets strengthens your business while leveraging subscription scalability.

Examples

• Companies like Slack reduce churn by enhancing communication experiences for existing users.
• Salesforce maintains customer trust with a heavy emphasis on feedback loops.
• Spotify builds loyalty through constant partnership integration and regional expansions.

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Takeaways

1. Center every decision around your customers’ evolving needs. Continuous service upgrades will help you retain loyalty.
2. Create flexible pricing tiers that invite new users while incentivizing premium upgrades.
3. Assemble robust IT and data systems tailored for agility, ensuring seamless customer experience across all subscription stages.