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Generation Rent: Subscription Models In Consumer Electronics

The so-called 'access economy' is about to get very big, very quickly, according to the experts.

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The so-called 'access economy' is about to get very big, very quickly, according to the experts.

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Generation Rent: Subscription Models In Consumer Electronics

The so-called 'access economy' is about to get very big, very quickly, according to the experts.

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A fancy house, a nice car and an abundance of possessions that show our status and success. These are all things that we have traditionally aspired to, but the financial crisis welcomed a new group of consumers - the millennials, for most of whom ownership is dead.

According to a recent report from the Resolution Foundation, one in three millennials in the UK will never own their own home. Likewise, surveys conducted by the likes of Goldman Sachs, PwC and Verdict indicate that owning a house is no longer a realistic aspiration for most, while another study predicts that car ownership in the US will reduce by 80% by 2030.

Though millennials may still wish to one day enter the real estate market, desire to own has lessened in recent years. The lack of appetite for ownership however extends far beyond the home.

Subscriptions are nothing new but in the wake of the financial crisis, millennials, the first generation of digital natives, have given rise to what is being called a “sharing economy,” increasingly opting for access over ownership. This trend has grown dramatically and the e-commerce subscription market is expected to be worth £1 billion in the UK by 2022.

Initially led by digital entertainment, and the likes of Netflix and Spotify, the subscription model has infiltrated everything from beauty and grooming (Dollar Shave Club) and fashion (Style Lyrical) to travel (Surf Air). The concept now seems set to spill over to consumer electronics too, with companies such as Grover leading the way.

Moving from the traditional pay-per-product, to a pay-per-usage model lets users rent an electronic device for a specific period of time for only 5% of the retail price. Once the item is returned, it can then be rented by someone else. Electronics is an area where the subscription economy can truly thrive, as renting is more appealing to consumers who seek to avoid purchasing products that may soon become outdated.

So how can consumer electronics brands and retailers tap into the new trend?

To begin with, it is important to understand the different types of subscriptions that can drive growth and work out which one is most appropriate for your brand. In its report, McKinsey & Company revealed three distinct categories of subscription models: replenishment-based, which is used to save time and money for repeat shopping of the same or similar items; curation-based, which users sign up to gain access to a variety of products; and access-based, which is focused on exclusive access and VIP perks.

Despite the rise and rise of the subscription economy, it is important to remember that a subscription on its own is rarely a draw. Therefore, curated experiences, personalised to consumers’ interests and needs are key to driving growth.

Taking the three categories into account, consumers fall in three corresponding camps: those seeking to streamline purchases of products they do not want to have to keep track of (replenishment-based), those looking for recommendations they wouldn’t have thought of themselves (curation-based), and those interested in things that are not widely available to the public (access-based).

Adopting a data-driven culture is crucial to succeeding in the subscription economy. Customer data allows for a far more personalised service, and as you gain more information on the customer and their behaviour, you can better streamline your subscription model to meet their requirements either through cost-effectiveness and convenience of not having to deal with the task of buying ad-hoc (replenishment), range of products and personalised suggestions (curation), or exclusive experiences (access).

The success of subscription models is therefore underpinned by behavioural data. Content may be king, but out of the correct context, it can undermine the strategy that it is plugged into. Take a customer that has purchased the latest iPhone. They are unlikely to want to receive communications on new smartphone models any time soon.

They might however be inclined to consider purchasing accessories, such as headphones or portable speakers. Offering complementary products or services is key in the subscription economy.

A customer’s digital footprint provides insights into their interests and needs and can be harnessed to help brands communicate with them better. Taking a holistic costumer journey into account is pivotal, from initial browsing or a simple search through to purchase, use and subsequent custom.

This kind of contextualisation allows brands to improve personalisation by exploring questions such as “When did the costumer engage with content? Why? What device did this occur on?” all of which helps build a much clearer picture. In turn, this facilitates better communications and drives sales.

For example, customers might be keen to be reminded of an item they previously browsed but didn’t purchase, but the timing of the reminder and the context in which it appears is what matters most.

The one true way of ensuring contextualised experiences are converted to long-term customer loyalty stems from really listening to the customer. By doing this and observing behavioural data, a brand can convert data into actionable insights and learn a lot about how to engage with its audience and how it might need to adapt.

This is the true superiority of the subscription model. A customer’s changing needs does not mean an end to the relationship, but rather a new kind of relationship.

Mark Burgess is business director at smp.

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Generation Rent: Subscription Models In Consumer Electronics

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