Over the past few years consumer purchasing habits and demands have been key factors is creating a $400B+ subscription market in just the US, a market that continues to grow at nearly 20% annually. These new consumer expectations have forced software publishers to go from product centric business practices to service centric practices.
“80% of companies are seeing a change in how their customers want to access and pay for goods and services and 50% of these same companies are changing their pricing models as a result.” – The Economist
When Nexway™ first pioneered online sales and digital distribution for software publishers, the goal was to bring the “real world” point of sale to the Internet. As ecommerce evolved, technologies and practices for targeting, conversion, CRM and of course payment method and currency became the main focus. While subscriptions aren’t new (Nexway’s been powering them for 6+ years), the major impact of the model on the software publishing business is just starting to be apparent.
Subscriptions mean more than just recurring payments, and to software publishers, subscriptions mean a shift from delivering a product to delivering a service. As a business model, subscriptions have been growing exponentially as both a response to drastic pricing changes in the software space as well as evolving consumer habits and expectations. CB Insights recently published analysis of consumer price changes over the last 10 years. During this period software pricing dropped by 66%, and many software publishers have been left scrambling to recover evaporating revenue.
The most successful response to market demands for lower software pricing has been the subscription model and adoption of a service centric approach to customer engagement. The key transactional difference between product centric approaches and service centric approaches are that product purchase experiences are associated to a one time transaction, while services are linked to recurring payments. The overall value of the customer is linked to retention, no longer just conversion.
Subscription as a business model is not new (think World of Warcraft™), but it has been more and more the strategic choice for publishers who wish to retain their customer base. In order to Netflix and Chill™, listen to your music through Spotify™, use Dropbox™ as your backup or even get a good shave at a reasonable price thanks to the Dollar Shave Club, you need to subscribe. The tremendous success of these examples is self-explanatory, subscriptions are a viable business model and their adoption is well underway.
For the past 6 years Nexway has been a pioneer of subscription services and technologies among ecommerce providers. Together we have helped software companies respond to consumer demands and opportunities in the subscription space through collaboration in payments as well and customer experience and digital fulfillment.
Nexway: Leading provider of full-service e-commerce solutions for publishers and online retailers of digital software and video games. The company’s white label online stores/cart & in-app stores boost revenue of digital goods with purchase, freemium, trial, subscription revenue models. Based in Nanterre, France, with subsidiaries in the USA, Brazil, Germany, Italy, Spain, Luxemburg, Morocco, Poland, Japan. Leading companies who rely on Nexway include retailers Orange™, Yahoo! Japan™, Softwareload™, Best Buy™, Pão de Açúcar™, Amazon™; and publishers Kaspersky Lab™, Kingsoft™, Adobe™, 2K Games™, Big Fish™, ESET™, AVAST Software™.
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