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A heated steering wheel for $20 a month? What’s driving the subscriptions economy

<p>From gym memberships to music and movies, to razors, toilet paper, meal kits and clothes, there’s seemingly no place the subscription economy can’t go.</p> <p>Having conquered the software market – where it gets its own acronym, SaaS (Software as a Service) – the subscription model is now moving into hardware.</p> <p>Car makers are among the first cabs off the rank, using software to turn on and off optional extras.</p> <p>German auto maker BMW is offering “<a href="" target="_blank" rel="noopener">in-car microtransactions</a>” to access options for car buyers in Britain, Korea, Germany, New Zealand and South Africa. A heated steering wheel, for example, has a monthly cost of NZ$20 in New Zealand, and £10 in the UK.</p> <p>Other markets <a href="" target="_blank" rel="noopener">including Australia</a> will soon follow.</p> <p>In the UK, seven of 13 “digital services” – from heated seats to automatic high beam and driving assistance – are now available in subscription form.</p> <p>“Welcome to microtransaction hell” is how <a href="" target="_blank" rel="noopener">one headline</a> put it.</p> <p>But that’s probably overselling the onset of a corporate dystopia where “you will own nothing”. BMW’s motives are pretty straightforward – as is most of what’s driving the subscription economy.</p> <p><strong>What is the subscription model?</strong></p> <p>The subscription model means paying a fee for periodical access to a service or product. Until a decade or so ago, it was largely confined to a few select industries, such as the delivery of milk, newspapers and magazines.</p> <figure class="align-center "><img src=";q=45&amp;auto=format&amp;w=754&amp;fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset=";q=45&amp;auto=format&amp;w=600&amp;h=400&amp;fit=crop&amp;dpr=1 600w,;q=30&amp;auto=format&amp;w=600&amp;h=400&amp;fit=crop&amp;dpr=2 1200w,;q=15&amp;auto=format&amp;w=600&amp;h=400&amp;fit=crop&amp;dpr=3 1800w,;q=45&amp;auto=format&amp;w=754&amp;h=503&amp;fit=crop&amp;dpr=1 754w,;q=30&amp;auto=format&amp;w=754&amp;h=503&amp;fit=crop&amp;dpr=2 1508w,;q=15&amp;auto=format&amp;w=754&amp;h=503&amp;fit=crop&amp;dpr=3 2262w" alt="From milk and magazines, subscription services have proliferated with digital technology." /><figcaption><span class="caption">From milk and magazines, subscription services have proliferated with digital technology.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure> <p>Other business models had similarities – such as rental businesses – but the point of the subscription model was different.</p> <p>It was not about meeting a demand for a service someone only wanted to use temporarily or could not afford to own outright. It was about locking in a continuing relationship, to maximise “customer lifetime value”.</p> <p>As <a href="" target="_blank" rel="noopener">Investopedia puts it</a>, the subscription model’s focus is on customer retention over customer acquisition:</p> <blockquote> <p>In essence, subscription business models focus on the way revenue is made so that a single customer pays multiple payments for prolonged access to a good or service instead of a large upfront one-time price.</p> </blockquote> <p>This in large part explains why subscription services are now being adopted in markets outside their more obvious fit for things such as streaming news and entertainment.</p> <p>In a broad sense, consumers can now be divided into two groups. One group comprises the “transactional shopper”, who interacts with the vendor once or twice, then disappears.</p> <p>The other group comprises customers whose connection and “investment” in the brand is maintained through their subscriptions.</p> <figure class="align-center "><img src=";q=45&amp;auto=format&amp;w=754&amp;fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset=";q=45&amp;auto=format&amp;w=600&amp;h=338&amp;fit=crop&amp;dpr=1 600w,;q=30&amp;auto=format&amp;w=600&amp;h=338&amp;fit=crop&amp;dpr=2 1200w,;q=15&amp;auto=format&amp;w=600&amp;h=338&amp;fit=crop&amp;dpr=3 1800w,;q=45&amp;auto=format&amp;w=754&amp;h=424&amp;fit=crop&amp;dpr=1 754w,;q=30&amp;auto=format&amp;w=754&amp;h=424&amp;fit=crop&amp;dpr=2 1508w,;q=15&amp;auto=format&amp;w=754&amp;h=424&amp;fit=crop&amp;dpr=3 2262w" alt="The subscriptions model emphasises customer retention over customer acquisition." /><figcaption><span class="caption">The subscriptions model emphasises customer retention over customer acquisition.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure> <p><strong>E-commerce and access</strong></p> <p>Part of the growth in the subscription economy has come from companies riding the e-commerce wave, delivering goods such as meal kits, wine, coffee, baby supplies, pet food, cleaning products, razors and toilet paper.</p> <p>Consultant firm McKinsey has estimated the subscription e-commerce market is <a href="" target="_blank" rel="noopener">doubling in value</a> every year – though that was before the pandemic. It could be well be more now.</p> <p>The other part of the market is represented by BMW’s approach, offering extra features to customers that can only be accessed for a fee.</p> <p>In some cases this may involve standard “upsell” techniques. For example, when you buy a new Peloton exercise bike you’ll be enticed with <a href="" target="_blank" rel="noopener">subscription offers</a>, such as virtual classes and “customised” training programs, to “reach your goals”.</p> <p>Or increasingly, as with BMW’s heated seats and steering wheels, it can be done with software turning actual bits of hardware on or off.</p> <p><strong>What is BMW’s game?</strong></p> <p>Is BMW’s purpose to gouge its customers for more money through getting them to pay an ongoing fee for something instead of owning it outright?</p> <p>This is not what its subscription structure indicates. The opposite, in fact.</p> <p>Customers can still buy these options outright. A heated steering wheel in the UK, for example, costs <a href="" target="_blank" rel="noopener">£200</a>, and in New Zealand <a href="" target="_blank" rel="noopener">NZ$350</a>. But now they can also pay a subscription – for three years (£150, NZ$250), annually (£100, NZ$250) or monthly (£10, NZ$20).</p> <p>These prices represent a strong signal – that the cost of outright ownership is the most economical. It’s unlikely BMW expects anyone to sign up for the annual or three-yearly options. These are probably just to make the outright cost look more attractive.</p> <p>The monthly offering, on the other hand, may lure owners to try out a feature they would otherwise have rejected buying outright at the time of purchase.</p> <p>Indeed, car makers argue the reason they offer so many options as extras is because most owners don’t want them. So this mostly looks like BMW offering a “try before you buy” option.</p> <p><strong>The pitfalls of over-subscribing</strong></p> <p>That said, companies don’t need to have sinister motives for us to have concerns about the spread of the subscription model.</p> <p>The more things we pay for with “micro-payments”, the harder it becomes to keep track of payments.</p> <p>Many of us continue to pay for products and services we don’t use. A survey of 1,000 Australian adults in 2021, for example, found about a third wasted money on unused subscriptions or memberships – losing an average of about <a href="" target="_blank" rel="noopener">A$200 a year</a>.</p> <p>Deep psychological associations can influence these decisions. Experiments by US marketing professors Jennifer Savary and Ravi Dhar suggests people with lower “<a href="" target="_blank" rel="noopener">self-concept</a>” are less likely to sign up for subscriptions – but also less likely to cancel subscriptions they are not using.</p> <p>We may see the subscription model increasingly used in other sectors – including the health and justice systems.</p> <p>For example, a subscription payment may provide a better level of nutritious food for a resident in an aged care facility, or a hospital or even a prison. This is not dissimilar to the way private health insurance premiums are managed, but still presents important justice and equity concerns.</p> <p>So while there’s no reason to exaggerate the dangers of the subscription economy, it’s also prudent for consumers, advocacy groups and governments to ask “What next?”.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: --></p> <p><em><a href="" target="_blank" rel="noopener">Louise Grimmer</a>, Senior Lecturer in Retail Marketing and Associate Head Research Performance, <a href="" target="_blank" rel="noopener">University of Tasmania</a></em></p> <p><em>This article is republished from <a href="" target="_blank" rel="noopener">The Conversation</a> under a Creative Commons license. Read the <a href="" target="_blank" rel="noopener">original article</a>.</em></p> <p><em>Image: Getty Images</em></p>

Money & Banking

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How to stay on top of your online subscription spending

<p><span style="font-weight: 400;">Between online video streaming, sports, delivery services, music platforms, e-books and fitness apps, it's easy to lose track of what digital subscriptions you’re paying for.</span></p> <p><span style="font-weight: 400;">With our digital landscape pulling our attention in so many different directions, most of which need paying for, it’s not hard for our money to just disappear. </span></p> <p><span style="font-weight: 400;">While most services can be less than $20 per month, those costs quickly add up when you rely on multiple platforms for your entertainment. </span></p> <p><span style="font-weight: 400;">Research has shown that lots of Aussies are facing the same issues, </span><span style="font-weight: 400;">with subscription services forecast to rise by more than 58 per cent between 2020 and 2024.</span></p> <p><span style="font-weight: 400;">Telsyte managing director Foad Fadaghi said Aussies were quick to embrace digital entertainment, and the pandemic has seen this trend continue to grow. </span></p> <p><span style="font-weight: 400;">He said, “It’s not just video — it’s going to be gaming too. In the past, people would go to a restaurant or the cinema. When they’re locked up or their movements are limited, casual gaming is a huge attraction.”</span></p> <p><span style="font-weight: 400;">If you’re finding yourself overwhelmed by an influx of various subscription payments, there are ways to help you keep tabs on your spending. </span></p> <p><span style="font-weight: 400;">Apple will let you check ongoing subscriptions in the menu of an iPhone or iPad under your iCloud account, for example, and you can cancel and view items from there.</span></p> <p><span style="font-weight: 400;">Subscriptions ordered through Google can be managed in the settings of your Android phone or in a dedicated menu at</span></p> <p><span style="font-weight: 400;">There are also budgeting apps such as where you can sign up for reminders on when your subscriptions need to be renewed. </span></p> <p><span style="font-weight: 400;">Even though they’re a recurring expense, Mr Fadaghi said some subscriptions may be worth it. </span></p> <p><span style="font-weight: 400;">“It comes down to the utility of those subscriptions,” he said.</span></p> <p><span style="font-weight: 400;">“If people are using them regularly, it can make good financial sense.”</span></p> <p><em><span style="font-weight: 400;">Image credit: Getty Images</span></em></p>


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4 top subscription TV series

<p>These new TV series will have you hooked in no time at all. Check them out and tell us what you think.</p> <p><strong>1. <em>And Then There Were None</em> – Foxtel</strong></p> <p>The three part series <em>And Then There Were None</em> is a thrilling adaptation of Agatha Christie’s best-selling novel. Much darker than your regular ‘whodunnit’, the story, set in the 1930s, sees 10 strangers come together in a mansion on a remote island off the coast of Devon. As the guests start to die one by one, the survivors must work against the clock to determine who the murderer is.</p> <p><strong>Starring</strong>: Douglass Booth, Charles Dance, Maeve Dermody and Sam Neill.</p> <p><strong>Coming to Foxtel April 23 2016</strong></p> <p><strong>2. <em>Secret City</em> – Foxtel</strong></p> <p>With a stellar cast, Foxtel’s new political thriller is set in a world of lies, betrayal and murder. Set against the backdrop of Canberra, a political journalist uncovers a conspiracy that could put innocent people’s lives at risk. Featuring iconic locations such as Parliament House and the National Gallery, Foxtel’s new series is set to be a hit.</p> <p><strong>Starring</strong>: Jacki Weaver, Dan Wyllie, Alex Dimitriades</p> <p><strong>Coming to Foxtel May 26 2016</strong></p> <p><strong>3. <em>The Ranch</em> - Netflix</strong></p> <p>With a winning combination of actors such as Ashton Kutcher and Sam Elliot, and some of the writers from <em>Two and a Half Men</em>, <em>The Ranch</em> seems set to be another hit for Netflix. When Colt (Ashton Kutcher) returns home to the ranch from his semi-pro football career, he has to face the father and brother he left behind, as well as his mother Maggie  (Debra Winger) and his high school flame (Elisha Cuthbert). This is a comedy that might take some time to grow on you, but definitely give it a go.</p> <p><strong>Starring</strong>: Ashton Kutcher, Danny Masterson, Debra Winger, Sam Elliot, Elisha Cuthbert and Kelli Goss.</p> <p><strong>Coming to Netflix April 1 2016</strong></p> <p><strong>4. <em>Better Call Saul</em> – Stan</strong></p> <p>If you loved <em>Breaking Bad</em>, you’ll love this prequel which is set six years prior. Before he was the top attorney for Walter White, Saul was Jimmy McGill, a small time hustler trying to make it big. He looks after the little guys alongside Mike, a private investigator. Series one had rave reviews and the second series is about to be released so it’s a great time to catch up.</p> <p><strong>Starring</strong>: Bob Odenkirk, Jonathan Banks, Rhea Seehorn.</p> <p><strong>Series 1 available on Stan, with Series 2 debuting March/April 2016</strong></p> <p><strong>Related links:</strong></p> <p><a href="/entertainment/tv/2016/04/5-classic-tv-series-to-revisit/"><span style="text-decoration: underline;"><em><strong>5 classic TV series to revisit</strong></em></span></a></p> <p><a href="/entertainment/tv/2016/02/top-tv-shows-to-watch-2016/"><span style="text-decoration: underline;"><em><strong>Top 5 TV shows to watch in 2016</strong></em></span></a></p> <p><a href="/entertainment/tv/2015/11/netflix-knows-when-you-get-hooked-to-a-tv-show/"><span style="text-decoration: underline;"><em><strong>The weird fact that Netflix knows about you</strong></em></span></a></p>


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