With the rise of the Subscription Economy as well as the concern for a more sustainable way of life, it was only a matter of time before a new business model related to mobility would arise.
The automotive industry and related businesses have now a real alternative to the traditional, transactional business model: According to the latest Subscription Economy Index™ (SEI) report recently released by Zuora, companies that offer a subscription-based business model have outpaced the growth rates of the S&P 500 by 4.6 times over the past decade! And this trend has only increased since 2020. SEI Manufacturing businesses also continued to grow, with 6.7% revenue growth on average for 2021.
How can we explain this data?
1. With subscriptions, companies monetize new services
First things first. The Subscription Economy provides a new monetization route through digital connectivity, usage of available data, and recurring services for an industry that is showing signs of growth stagnation, while facing rising input costs and declining margins.
The change from a transactional model to a technological change implies preparation. Change must be anticipated, evaluated, designed and implemented in order for companies to be able to aggregate data and analyze it properly – no matter how dense it is – and in the end, close accounts as fast as accurately as possible.
Any service can be monetized as long as you are prepared for it.
2. With subscriptions, companies are customer focused, which improves the customer experience. As a result, they also increase customer satisfaction & retention
Recurrent transactions enable customer relationship-based models that build long-term loyalty and generate sustainable and predictable revenue growth.
One key figure from the report The End of Ownership released by Zuora to illustrate this: 82% of Italians have at least one subscription (2.6 on average). How and why do consumers decide to subscribe to a service and how do companies retain them? Because the offer and the price are attractive. But also because the service offered fits demand and meets customer expectations: SEI companies know their customers better than those who are sticking to a transactional model.
This last point is key. Companies that stand out are always one step ahead of their customers, offer them a personalized experience, and fidelize them in the long term. Customer loyalty is very important: 70% of the revenue of companies with a subscription-based business model comes from their existing customers.
3. With subscriptions, companies generate more revenue
While cars are traditionally known for depreciation almost immediately after purchase, ongoing digital services can provide an opportunity to continuously update vehicles with new software, helping maintain their value over time. In- car services are also creating entirely new revenue streams. General Motors predicts that its car subscription services will reach as high as $25 billion in revenue by 2030, and the car subscription market is set to grow by 71% in the next year by offering customized services.
4. With subscriptions, companies are more sustainable
Consumers no longer want to buy a car. They would rather get from point A to point B. They crave accessibility and reactivity, at the right price. In short: they want flexibility.
They also crave sustainability.
Mobility as a service is the right answer to their expectations.
Porsche has launched a series of single-vehicle subscriptions where subscribers obtain access to a single Porsche model for one or three months, rather than buying it. Clyde has also launched a new subscription service with multiple products: cars, bicycles, scooters, public transportation, bike racks, as a service. They give their customers the possibility to cancel, upgrade or downgrade their subscription whenever they want. Zuora helped the largest Swiss automotive company launch and run their new subscription service in less than 8 weeks!
Ford has also taken the plunge with Ford Smart Mobility, a subsidiary launched to make it easier for people in cities to move according to their needs and habits while respecting their environment.
In conclusion, the subscription business model has legs in the mobility arena and companies that make the move see their revenue grow faster than the others.
Manufacturing companies should focus on reframing their offerings as long-term and recurring service solutions, testing new models alongside their current offerings.
We also recommend they invest even more in cloud technology, focusing on deeper insights to deliver ongoing value with the highest flexibility. Leveraging data-driven insights to enhance service options for maximum revenue impact strengthens the relationship between the manufacturing industry and their customers.
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More information: www.zuora.com