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The rise and rise of Australia’s subscription economy

Fears that interest in subscription billing models would wane when the world reopened proved to be unfounded, meaning consumer behaviour has actually changed.

The subscription economy’s star has undoubtedly risen over the past couple of years. Five years ago, only about half of Australian adults subscribed to a paid service, and the figure is now eight in ten. 

The question everyone wanted to know is to what extent this growth was “circumstantial” and would recede as we returned to previous habits and ways of life. 

The same question was asked of a range of services that benefitted from a more homebound populace: would people, for example, continue to consume internet services at the same data volumes and fervour for higher speeds? 

Internet consumption backed off a bit as states and territories reopened and more entertainment options became possible. But a sudden recession in the subscription economy after years of customer and revenue gains did not eventuate.

The latest numbers show subscription businesses are “enduring beyond” the surge in interest and use over the past two years. “While pandemic lifestyle changes accelerated subscription adoption … subscribers continue to seek out these valuable digital services,” the research found.

It adds that churn rates – customers dropping subscriptions or moving between services, “a metric that can measure the health of subscription businesses” – are down, suggesting services “are keeping their pandemic subscribers and that behavioural changes could be permanent.”

The model has become so pervasive that subscription services are now everywhere. As a PwC expert noted in a recent podcast, “We’re seeing the whole idea of subscription purchases being made across every major industry you can think of. You can buy a logistics service, you can buy a car, you can buy a data centre solution. You can buy all sorts of information services, streaming services, all as a subscription or on a consumption basis.”

This mirrors our own experience as well. Today, companies in every industry and market use subscriptions to draw customers in and keep them over the long run.

And subscription billing will continue to allow a new generation of business models to thrive. UBS, for example, sees 5G driving a new wave of subscription business models. “The subscription economy is just getting started … One particularly potent potential driver is 5G, which should spur subscription businesses in latency-specific areas such as cloud gaming and autonomous driving,” it recently wrote.

While there are varied use cases and opportunities, the common thing that all subscription-based businesses need is a billing platform that allows them to exist and function, differentiate in a crowded market, and that can support as wide a variety of growth ambitions as possible.

The old is new again

Some businesses have been using the subscription billing model for hundreds of years. 

Dating back to the 17th century, English book publishers and periodicals pioneered subscription billing when they collected “sponsorships” from readers. In the late 1800s, AT&T charged users for monthly access to its telephone services. Throughout the 20th century, magazines, news publications, and milk delivery companies also collected payment for their products and services at set frequencies.

These are a few isolated examples of how different types of businesses have deployed subscription billing in the past. 

With current technology, subscription billing is easier to execute than ever before. Ecommerce and SaaS helped bring subscription billing into the mainstream over the last few decades. This is primarily why we are now seeing it spread across numerous sectors and markets.

Achieving success and scale

For people with existing subscription-based businesses or ambitions of starting one, there are several key requirements and capabilities that must be implemented to improve their chances of success.

Because so many businesses are offering subscription services today, choices must be offered to purchasers in order to remain competitive.

Businesses should try to offer a choice of subscription tiers and have a platform that automatically assigns access to features depending on the chosen tier. 

They must be able to manage individual subscribers based on their preferences and history with the product or service. In addition, businesses should also have self-service capabilities where customers can initiate subscription billing on their own for a particular product or service and perform other administrative functions without needing to engage anyone, and they should have the capability to accept a wide variety of payments types.

To reap the benefits of subscription billing, businesses should be able to automate workflows, including invoicing, and revenue recognition, and handle failed payments with ease. These should not be manual if the business is to effectively compete with others all vying for a share of the wallet. Consumers have a lot of choices and frequently move between similar subscription services.

Finally, subscription billing performance data should be available for business intelligence. Finance teams must be able to analyse real-time billing productivity and generate reports to understand the effectiveness of their subscriptions.

With sophisticated reporting capabilities, organisations can refine their models over time and maximise the lifetime value of their customers.

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Carl Warwick

Carl Warwick

Carl Warwick is Regional Sales Director APAC and Japan for BillingPlatform, an agile, cloud-based revenue management platform which gives enterprises the freedom to monetise and deliver products and services that result in growth and competitive differentiation. He joined the company in 2021 and has more than 20 years of sales, business development and account management in the IT industry having previously worked for organisations including Unit4, Coupa Software, SAP, NetSuite, Network Associates and Brocade.

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