Apple does it.
Spotify always has.
Even Starbucks wants to do it.
Attempts to convert paying customers into subscribers are gaining momentum across industries. And Apple has successfully transitioned much of its business in this way. So what lessons can we learn from how Apple did what it did?
Apple created a $ 86.000 billion service company
El segmento de servicios de Apple no es solo News +, Music, TV +, Arcade, Fitness e iCloud. It also includes AppleCare, App Store, Apple Pay, Apple Card, iTunes Store and a range of lesser-known manifestations, presumably including money the company is paid to have Google's search engine default to its line of products.
The services element of Apple's business has tripled in the past six years and now generates about € 86 billion in revenue, the company said in its last tax appeal.
That's more than € 7 billion per month in predictable revenue.
Apple CEO Tim Cook said the company now has 745 million paid subscribers to its services, including integrated subscriptions. "That's an increase of 160 million year-over-year, which is five times the number in five years," he said.
Apple's growth follows suit. The Zuora Subscription Economy Index shows that underwriting companies have grown six times faster than the S&P 500 in the past nine years.
The services are not new
From cars to real estate rentals to magazine subscriptions, people have always been willing to pay to access what they need.
The evolution of the Internet and the technology that uses it has extended the scope of the idea to all industries, as long as a company can identify or reuse an asset to make it available in that way.
Apple seems dedicated to identifying and introducing new service-based companies, like Apple Business Essentials, for example. Another is ongoing speculation that the company could enter the Buy Now Pay Later (BNPL) market.
Through an external partner, Apple recently introduced what could be another NBT (Next Big Thing) in the form of equipment leasing for business users. Like the iPhone Upgrade Program, the program points to a future in which Apple will offer its hardware as a service, in exchange for a monthly subscription.
This is good for consumers who can access solutions they might not otherwise be able to pay for, but it also has a significant advantage for business users.
Businesses love services too
Enterprise markets are moving fairly quickly toward "as a service" models for everything from networking and hardware to enterprise services and third-party cloud storage.
Businesses large and small appreciate the ability to rapidly scale deployments to meet the business needs unlocked by these models. They also like that the costs are much more predictable. McKinsey once claimed that 82% of companies would rather subscribe to the software than purchase a perpetual license.
Note that Apple now offers a service for business users with Apple Business Essentials, as this may become more important over time.
Starbucks' attempt to create a subscription tier for coffee reflects this trend as much as all tech bloggers silently asking for help (NB: even this author is trying).
On a much less mundane level, mobile networks that seek to separate network technologies from the hardware that run them also reflect this change, prompting the introduction of key services such as unified communications, SD-WAN, or solutions. Network endpoint security for a monthly subscription. . This shift toward subscription-based rather than ownership-based access is occurring across all industries.
How are companies making this transition?
So how do you turn your business into subscription-based income? Every business is different, but I think courage is a good starting point.
One thing Starbucks and Apple have in common in their approach to creating services to attract subscriber revenue is that, in any case, they took an existing business and were brave enough to cannibalize it.
Apple owned the world's largest music store before launching its music streaming service, while Starbucks already makes many beautiful lattes. They both needed some courage to risk turning their existing profitable concerns into new business models.
Lateral thinking also helps. AppleCare shows that many users will pay regular fees for equipment service and maintenance. Other companies, including smaller ones, may already offer support packages that could be turned into services.
Flexibility is one of the biggest benefits of underwriting.
You should be able to subscribe, unsubscribe, increase and decrease what you pay at will. "We recommend that companies design their offerings for maximum flexibility and freedom for consumers, so that customers can use them anytime, anywhere, however they want," said Zuora President Amy Konary.
But deep down, business is always a relationship.
Relationships matter.
Apple Mac, iPhone and iPad customers are satisfied customers with customer satisfaction scores above 90 points. This happy band of Apple acolytes has already shown a willingness to invest in new Apple services as they emerge; maintaining them is the challenge.
Transactional flexibility services allow dissatisfied customers to unsubscribe quickly.
Good experiences help build strong customer loyalty, which in turn translates into greater acceptance of your mistakes and greater interest in your company's future services. It also collects more customer data, which can inform future product development.
there are risks
Are there any risks? Clear. For example, during the transition to subscriptions, revenue may drop below operating expenses over a period of time as the service grows.
At the same time, you need to ensure that you offer a service that truly delivers value to subscribers. Focusing on customer needs (in Apple's case, as demonstrated by customer satisfaction) is critical to supporting this transition.
It should also be reflected in your business culture. (That's important. A CFO Research / Salesforce survey found that two-thirds of companies trying to grow their subscription businesses face operational challenges within their own internal culture.)
Apple recognizes that communicating with customers is critical to its success, but it also knows that it must deliver the products and services that its customers really need.
Marketing always works best when applied to Apple's retail, which is about delivering solutions that customers really need, rather than forcing them to adapt.
This approach has helped Apple's retail stores become some of the most profitable on the planet. It is also anchored at the heart of corporate culture. Apple's famous human interface guidelines have always aimed to put the user at the center of the experience.
To take people with you, you have to find them where they are.
Follow me on Twitter or join me at the AppleHolic Bar & Grill and Apple Discussion Groups at MeWe.
Copyright © 2021 IDG Communications, Inc.