After years of supporting one-time equipment purchases, industrial firms are coming to rely more and more on subscription-based business models as the demand for access over ownership keeps soaring.
Making the transition to subscriptions opens up new possibilities for industrial equipment manufacturers to create a loyal base of customers and build steady revenue.
Though machinery specifically built for industrial use may often carry a hefty price tag, one-off product sales have always been a part of the industrial equipment business. But that is now changing as modern industrial organizations become far more reliant on subscription-based models principally built around the repeated delivery of services. Most subscription plans currently sold by equipment manufacturers charge customers a predetermined month-to-month or annual fee for access to top-quality machinery as well as maintenance and extended support services.
So far, offering clients an alternative to machinery ownership has proved a great success for many in the industrial equipment sector. The move to recurring revenue business models not only kept firms afloat amid growing COVID-19 concerns but, as research shows, it also helped 8 out of 10 companies to either sustain or grow their subscriber base. Firms that successfully turned customers into subscribers—who are, according to experts, up to 217% more profitable than one-time buyers—have experienced significant boosts in revenue, too. As it happens, subscription-based manufacturers are generally seeing stronger upticks in revenue than those who sell one-off equipment deals:
“Subscription businesses grow revenues about five times faster than traditional peers. (…) [The subscription] model has already proven its value in the past, but also in the current context [as subscription] companies are typically more resilient, flexible, and better equipped to respond to the changing market needs.” — Deloitte, Subscription & Usage-Based Pricing
A growing number of customers have come to put less of a focus on large up-front investments in machinery and more on regularly paid access to the products or services supplied by a subscription-based provider. Though subscriptions are reaching more people, turning one-and-done customers into long-time subscribers is not as simple as it seems. Some industrial equipment manufacturers implement strategic pricing plans, providing free trials or personalized introductory offers to minimize subscriber churn. But one problem is that pricing, although a particularly vital element of a successful subscription offering, is increasingly insufficient to get customers to sign up for recurring services and keep them subscribed. So what is there to do? The answer could be to reinvent the subscriber experience in a way that shifts focus from price to value.
As the demand for industrial equipment subscriptions shoots up, those who launch subscriber experiences that prioritize flexibility and continuous value delivery are more likely to set themselves apart from key competitors in the market and lock customers in for repeat business.
Industrial Equipment Firms That Provide Excellent Subscriber Experiences Will Prevail
A successful subscription offering aligns closely with the growing expectations of customers. Today’s subscriber has increasingly come to expect better experiences and would go to great lengths to ensure that firms meet this demand. 86% of customers would even go as far as paying more in exchange for a superior experience, according to a study.
But what exactly makes an excellent experience for subscribers? Often, the best subscriber experiences go beyond monetary benefits and:
Offer Full Flexibility to Customers
Equipment manufacturers must give clients complete flexibility over their subscriptions. Each customer should be able to cancel, pause, or change subscription plans at any point in time without worrying about undesirable or unforeseen consequences.
Another way to add more value to a subscription service is to introduce greater flexibility to pricing. As many customers had to cut budgets in response to COVID-19, firms may need to offer new pricing options to suit the evolving needs of their subscribers.
Part of what makes industrial equipment subscriptions so valuable to customers is the convenience with which they can make a change as their needs shift.
Add Continuous Value to Subscriptions
It is not unknown that retention always trumps acquisition in a subscription-based model. The hard truth is that not all users will renew at the end of their subscriptions, but there might still be an opportunity to turn things around. The key is to provide subscribers with ongoing value.
Value—not price!—is what keeps customers committed in the long run. But how can industrial equipment manufacturers provide the type of value clients are willing to pay for on a recurring basis? Most firms today continuously add value to the subscriber experience through personalized offerings, exclusive discounts, or loyalty rewards.
Ultimately, industrial firms must sell the experience (at least!) as much as the service provided in exchange for recurring payments. A remarkable experience stays with customers and makes them more likely to remain loyal to a subscription provider.
The Demand for Industrial Equipment Subscriptions Will Keep Rising Steadily
The industrial equipment industry has seen, like many others, a rapid explosion in subscription demand since the start of the COVID-19 pandemic. Firms all over the world have had to regroup and transition quickly towards subscription-based business models to survive COVID-19’s impact and meet growing demand. Now, two years later, ownership is falling deeper into decline as many industrial equipment manufacturers have no intention of returning to the pre-pandemic way of doing business.
Experts, too, confirm there is no turning back:
“The subscription economy was on the rise before the pandemic, but its wider and deeper reach in nearly every industry is expected to last even after the pandemic subsides (…). [The] ‘subscription economy’ will grow to $1.5 trillion by 2025, more than double the $650 billion it’s estimated to be worth now.” — The Washington Post, Everything’s Becoming a Subscription, and the Pandemic Is Partly to Blame
For a slew of industrial equipment manufacturers, the future is subscription-based. But exceptions exist. Though the use of subscriptions continues to grow rapidly among industrial customers, ownership will still resonate with some important segments in the manufacturing sector. Therefore, it is safe to say that subscriptions will not completely replace industrial equipment ownership—at least not yet.