The Rise, Fall, and Return of the Subscription Model

At 9 months of age I was already toddling. I was taking regular breaks and using plenty of furniture to steady myself, but I was up and mobile. Unfortunately, one of my laps of the lounge culminated in me sitting on top of the VCR. I was sans-nappy, and decided that was the moment to, shall we say, relax. This led to an awkward telephone conversation with a woman at Radio Rentals who laughed – quite mercilessly – at my mum’s reason for needing a replacement.

Why am I telling you this charming family anecdote? While researching this article (that was going to be called, ‘The rise of the subscription model’), I found lots of blogs that suggested the idea of subscribing to a service was an emerging trend. Someone born in the digital age might assume that the subscription model is a relatively new concept made successful by the likes of Netflix, Spotify, Birch Box, or Hello Fresh.

But, because they have gleefully told that story at numerous family gatherings, I knew that my parents were making monthly payments for their VCR and TV back in the 1980s. Sure enough, a little research confirmed that paying a regular fee in return for services or products has been around a lot longer than many people realise.   

The birth of the subscription model

The earliest description of paying for a service in instalments (that I found) dates back to the 1500s when European cartographers were publishing maps of previously undocumented land that was being discovered, occupied, and conquered. The aristocracy and academics were buying these maps, but always in the knowledge that updated editions would be forthcoming as exploration continued. The map publishers asked customers to subscribe to future versions of their maps, and the ongoing payments funded their ongoing explorations and map production.

The most well-known example of an early subscription model is the newspaper and magazine industry which, as far back as the 17th century, was encouraging customers to subscribe to regular publications to cover overheads and delivery costs. Over the years several different types of subscription models have emerged.

Today, for a monthly fee, you can receive a box delivered to your home full of just about any product from socks and make-up to chocolate and your evening meals. Some are mysteries that have been curated especially for you by an ‘expert’, or for a monthly or annual fee you can access exclusive content or events. We can have the latest gym equipment, vehicles, mobile phones, software, and technology, as there are very few items that we need to own to use.

The pursuit of ownership

While paying as we go has been part of our society for so long, we can’t get away from the fact that, in the UK, renting or leasing has been regarded as inferior to ownership. A possible reason for this is that as technology became more affordable, renting/leasing became less common and gradually took on negative connotations; only someone who could not afford to buy something outright would need to spread the cost in that way. Combined with our national perception of property ownership as a symbol of success (not a universal attitude by any stretch), and the concept of renting/leasing became tainted.

However, skip a few frames to today, and our buying habits and attitudes are changing at a faster rate than ever before, more so than many of us realise. We don’t ‘go shopping’ anymore – we ‘are shopping’ at all times. We can make a purchase at any time of day or night, from anywhere in the world with an internet connection. If we cannot afford to pay for it all in one go then and there, we expect to be able to pay in instalments. Maybe we can’t afford £300 or £3,000 today, but £50 or £500 per month for the next 6 months? More than doable.

The rate at which technology moves on, and the fact that we are being marketed to from every direction all day and night, are also major influences on our buying habits. When we buy a product, in a matter of months, a new improved version will be released. We buy products not as long-term investments, but in the knowledge that in a few months or years we will want to upgrade or try something new. There is little point investing in assets that are going to depreciate in value or become obsolete, so paying a large chunk of cash to own something has become less attractive.

The past, present, and future of finance is flexible

It seems that negativity towards leasing in general is fading, but there is a stubborn perception in several industries that suggesting finance to customers will cause offence in some way, i.e., that they will imply they cannot afford to pay in cash. In reality, this is a rather outdated view, as choosing to pay via a subscription model or a finance lease often has nothing to do with affordability.

Customers want convenience and flexibility. They expect to be able to shop and pay in the way that is most convenient to them. They might shop online, on the high street, in the markets, or a combination of all three. They might pay upfront in cash, or they might decide to take out a flexible subscription, or to pay in instalments via a finance deal.  

Service providers that do not recognise the need for greater flexibility are running the risk of lagging behind their competitors. Offering more flexible finance arrangements creates a longer-term relationship with a customer beyond a single transaction, increasing customer lifetime value. This type of arrangement has been working since the cartographers of the 1500s found a way to fund their exploration of the world. It has been enabling individuals, families, and businesses to access the technology they need to thrive, whether that technology is a mobile phone, a VCR or 500 state-of-the-art laptops for their employees.

The subscription model, leasing, and renting technology are not new ideas, and it’s likely that they will continue to benefit both customer and service provider for many years to come.

If you are a business owner wanting to offer your customers more flexible payment options such as a finance arrangement, click here to get in touch.

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