“Here’s your car – don’t forget to like and subscribe!” Sounds weird, right? But all too soon, phrases like this might not sound so strange. There’s no question that subscription-based products and services are taking over. Back in 2017, it was estimated that 90% of UK consumers are now subscribers, and now customers are gradually transitioning from traditional car rental models in favor of using ‘car clubs’.
Enterprise Car Club, perhaps the most famous of these car clubs, which aren’t restricted to the office and opening hours – they’re just booked through an app, at which point the nearest car becomes available. These vehicles are increasingly being hired by individuals rather than companies, and often paid for by the hour. Many people see car clubs as providing the blueprint for the type of ‘car subscription services’ we could see in the future. Here, we explain why they’re becoming more popular.
What is the subscription model?
You probably know the basics – rather than making a one-off payment for a product or service, instead you sign up and make regular payments on an ongoing basis. Subscription services broadly can be categorized into three main types:
- Access models provide perks, products, and services on a membership-only basis, with their commodities closed off to non-members. Examples include Amazon, Netflix, Xbox Live and the Playstation Network.
- Repeat purchases provide customers with the same goods on a regular basis. Cornerstone does this with razors, for example, and Dollar Shave Club is one of their most famous American counterparts.
- Subscription provides customers with regular boxes of products, often curated. Unlike repeat purchases, the contents of these boxes might not be the same each time, and will likely vary often. Graze and HelloFresh are two popular examples.
This last one is the most popular, closely followed by repeat purchases. So, now you know how it works. The question is – why?
Why the subscription model works for so many businesses
While it’s not necessarily perfect, there’s lots of evidence to suggest that subscription-based models bring plenty of advantages for customers and businesses alike, which goes some way to explaining why they’re gaining quite so much traction across the globe.
- Convenience – the first and most obvious advantage is simply more convenience for consumers. They get the benefit of having their chosen product or service ‘on-tap’. That means they don’t have to remember to replace their razor blades or pop to the shops to get some more – it saves them both physical and mental effort.
- Easier planning and budgeting – closely related to convenience, a regular subscription allows consumers to plan their finances more effectively. Regular payments are more easily factored into monthly budgets, rather than having to pay for products or services on an as-and-when basis.
- Scale their plan up and down to suit them – if consumers decide they’re too busy to watch all the films on their current plan, for example, they can downgrade to a cheaper plan until they’ve got time, and upgrade again at their leisure.
- Convenience – subscription services provide companies with a more predictable, regular income. This makes planning easier for them too, as they can predict volume and demand, reduce waste, and streamline their logistics.
- Higher retention rates – subscribed customers tend to be more loyal, and therefore less fickle. Admittedly, it’s a harder initial sell, but customers who buy into it tend to stick around.
- Faster feedback and data acquisition – the subscription model means that companies are constantly acquiring data on how customers use, access and enjoy their services, allowing them to reflexively adapt their marketing and sales strategies for maximum profitability.
Why the subscription model works for cars
The subscription model already provides a number of great benefits to businesses, and there are a lot of reasons it could work for cars, too. In fact, Scrap Car Network has already cited some of these reasons as probable factors in the gradual decline of car ownership, making the market’s transition into a subscription-based model all but inevitable.
It saves consumers thousands in lump sums and ongoing costs
Cars are expensive. In fact, a car is often regarded to be one of the single biggest purchases the average person will make in their lifetime. Buying one requires hundreds or even thousands of pounds. And as every driver bitterly knows, the costs don’t end there. There’s also tax, fuel, insurance, and maintenance – all of which can end up quickly draining the wallet. With a subscription service, the service provider takes on most of that for you – so you get all the perks of car ownership at a fraction of the cost.
It also saves consumers time and effort
Partially due to the large financial investment required, buying a car can itself be a lengthy process of weeks or even months. What’s more, just owning a car can take a lot of mental energy and organization – at a minimum, you’ve got to ensure that you’re making all the correct payments and that you know where your paperwork is. Then there are the more everyday annoyances, like the on-off battles with your neighbors over street parking spaces. Subscription models provide the perfect antidote to that, minimizing the effort and organization required while still letting you enjoy all the traditional perks of car ownership.
We need our cars less than we used to
Interestingly, today’s digital age is starting to make certain types of travel increasingly redundant. Now, we can easily use our phones or tablets to do tasks that once would have required us to be physically present elsewhere. Errands at the bank or post office, for example, can be done from the comfort of our own sofa, as can the weekly shop. It all lessens our dependence on our cars, giving us less value out of permanent ownership.
Not everyone even wants their car all the time
The ongoing climate crisis is fast becoming a top priority on everyone’s agenda at the moment, especially for young people here in the UK. This is leading many drivers to start cutting down on the number of hours they spend out on the road, to minimize their carbon footprint. A car subscription service can appeal to this growing demographic by helping them to largely eschew driving, but providing them with the option of a short-term car hire when they really need it.
So, when will the subscription model become the norm for the automotive industry? Right now it’s difficult to pin down an exact timescale, but there’s no doubt it’s gaining momentum. With big names like Ford and Volvo already throwing their weight behind the concept, it just remains a question of when the other global manufacturers will follow suit.