Dave Prezzano, Managing Director, HP U.K. & Ireland.
The subscription economy is booming, and demand for anything-as-a-service just seems to keep growing. Last year, 81% of homes in the U.K. alone were signed up for one kind of subscription service or another, compared with 65% in 2020. Meanwhile, the average American consumer now has four subscriptions. With many retailers planning to make subscriptions a key part of their business strategy in the near future, this crucial model is set to become even more competitive.
While this trend has been accelerated by the disruption we’ve all been dealing with over the past couple of years, it continues to be driven by several long-term factors. Yes, the convenience of having everything delivered to your door during the lockdown was a lifesaver—but the evolution towards hybrid work, younger generations’ preference for pay-as-you-go services such as Netflix and Spotify and the rise of e-commerce were all building steam well before 2020.
As such, businesses seeking to put digital subscriptions and services at the heart of their growth strategy must realize that the rise of the consumer and B2B subscription economy is much more than a way to make a quick buck.
In fact, it represents a tectonic shift in how business is done. To achieve sustainable, long-term success, you must be willing to reinvent everything from how your products are marketed and commercialized to how your technology is designed from the start.
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Our own journey has brought us many lessons.
This is something we continue to do at HP, and it’s helped us achieve some notable results in the subscription and digital services market.
Our B2B Device-as-a-Service (DaaS) offering has become a leading workforce solution for businesses over the past few years. It works because it helps enterprises make one monthly payment that covers the devices they need, including support when it comes to hardware planning, configuration, deployment and disposal. In addition, analytics monitoring enables proactive management by reviewing performance and detecting potential problems before they start.
Our consumer subscription service, Instant Ink, experienced a record 30% growth in 2021 and now has more than 11 million subscribers worldwide. This service works because it helps customers pay a fee based on the number of pages they print rather than the amount of ink they use, offering savings of up to 70%.
We have also recently announced HP Managed Print Flex, a new service that’s in the pilot stage in the U.K., U.S. and Germany, with plans to expand this year. This offers our channel partners the chance to grow predictable print revenue and profit with even less complexity and risk by bringing a managed print services subscription plan to the cloud.
I hope you find the following advice useful because it’s all based on hard-won insights from HP’s own challenges amid the rapid growth we’ve recently navigated in the subscription economy.
How can you keep winning in the subscription economy?
It’s essential to realize that today, technology is no longer simply a product you own: It may be a specific outcome, experience or new capability you can subscribe to.
This changes how you must think about innovation.
It’s no longer just about building powerful, feature-laden hardware, it’s about finding ways to increase the overall value of technology by providing it as part of a service. This is why I believe services are becoming a new frontier for innovation. Whether you can unlock this potential value comes down to three key fundamental capabilities.
1. Seek out opportunities where you can offer greater convenience.
Organizations must invest in building the strongest product and service offerings possible that are flexible, fit for purpose and capable of integrating seamlessly into customers’ everyday lives. What do your customers already need that you can deliver in a more convenient, more cost-effective, less labor-intensive way?
2. Listen to your customers.
Optimize your products and services by gathering in-depth data and using the insights to drive hyper-personalized value propositions. This can give you a deep, evidence-based understanding of your customers’ unique needs, allowing you to find new efficiencies and opportunities. McKinsey recently found that 71% of customers now expect companies to deliver personalized interactions, and 76% are frustrated when this doesn’t happen. Meanwhile, another 2020 McKinsey study echoed the consensus that is willing and able to pay a higher price for customized services, solutions and subscriptions.
3. Build an ecosystem that earns customer loyalty.
Businesses must be willing to use these customer insights, as well as others, to continually reinvent themselves and maintain their customer base. This requires keeping a close eye on key tech and social trends and envisioning different possible futures for possible three, five and ten-year timeframes. These must then be fed back into your product and business development processes. Meanwhile, you must continue talking to your partner and supplier ecosystem to validate (or invalidate) your hypotheses—and then scale faster for a broader impact.
Throughout this process, it’s also important to remain relentlessly focused on the outcomes customers are wanting to drive toward and how you are going to get them there. This is what builds long-term loyalty.
The end of ownership?
The future is impossible to predict with certainty, but I believe it’s a reasonably safe bet that this fundamental shift we are seeing both culturally and economically as we shift from thinking of technology as a product to buy to an investment in the personalized outcomes, experiences and advanced capabilities is going to continue. This has the power to change how B2B customers and consumers invest in everything from PCs to workflows and digital manufacturing.
Those companies that succeed in finding new, digital-first ways to go to market will be the ones who have focused R&D investments in workflow-centric processes, supported by in-depth data analytics and smart digital strategies. This is what it will take to keep up with the competition: Understanding your customers well enough to continually optimize, personalize and reinvent your solutions in order to meet their needs successfully.
This is what business resilience looks like in the subscription economy.