Did you know that almost half of South African households are subscribed to a subscription video-on-demand service? You’ve got Netflix, right?

South Africa’s subscription economy is fast growing. We’ll be taking you through what this means, why you should embrace it, and what you’ll need to change to do so.

What is a subscription economy?

Subscription economy is the term used to describe the new economic landscape where customers are showing a preference for lower cost, subscription-based products and services over the traditional pay-per-product model. This comes with the rise of eCommerce making consumers feel more comfortable paying for things online.

This business model is far more effective than hoping a customer will return months or years after their initial purchase. The customer is retained by their commitment to monthly payments which increases loyalty to your brand. It also gives businesses a predictability they’ve never had before.

In South Africa today, there are 7.2 million active subscriptions. And the local subscription economy is currently worth $530M. By 2025, it will be worth over $820M. These numbers are evidence that the subscription economy in South Africa is on the rise and here to stay.

This isn’t just a South African phenomenon, the international subscription economy will grow to $1.5 trillion by 2025.

Why your business should embrace the subscription model

In simple terms, this model is great for businesses because they’re getting monthly recurring revenue and increased lifetime customer value. Subscription models are great for the customer because they get the products or services they need with low risk and easy accessibility. But here are some more reasons your businesses should embrace subscription models:

- Simplifies budgeting for your customer. Customers don’t need to worry about how much they’re spending if it’s the same every month. This convenience means they’ll keep coming back.

- Customer retention. It’s easier to retain customers who are subscribed than to attract new ones. If your subscription service is seamless, leaving you won’t even cross their minds. Struggling to retain customers? Read our blog about preventing involuntary churn.

- Automatic renewals. This means customers are always stocked up with what they need. Again, convenience is addictive and will keep them loyal to you.

- Accurately predict revenue. If you know how many subscribers your business has, you can accurately predict your revenue. This means that your budgeting and planning for each month can be more true to reality. Your risks will be more calculated and your growth will improve.

What you need to change

Your customers are buying differently. They're moving towards a subscription-based buying model. So you need to shift your sales process to meet the new customer value requirements.

Here are 3 changes you need to make to your sales model:

1. Get aligned. To retain customer loyalty and acquire new ones, your business needs to be aligned at every touchpoint. For perfect alignment, focus your messaging on:

- Your value comprehension, or your understanding of current trends in the market.

- Your value offering, or your ability to translate your value comprehension into world class products or services.

- Your value engagement, or your articulation of what makes your products both valuable, and different.

2. Increase your customer value. To increase each customer's value, you need to know how much you're spending to acquire them in the first place (Customer Acquisition Cost). Once the amount you've spent getting them balances with the amount you've made from them, you'll need to focus on:

- Increasing their usage of your product.

- Increasing their reliance on your product.

- Increasing their loyalty to your brand.

The Customer Lifetime Value should equate to more than the Customer Acquisition Cost.

3. Lastly, you'll need to decrease customer churn. Read this blog to find out the best ways to do that.

To cater for the shift towards a subscription economy, you need to be working with a subscription commerce solution that understands that there’s more to collecting revenue than accepting payments. At Revio, we power subscription commerce for Africa. Get in touch with us for seamless billing and payments for your subscription business.