Fuelled by the growth of the digital economy and consumer demand, companies in Asia Pacific are increasingly tapping into the potential of a subscription-based business model, a Citi study has found.
This means companies in the region are increasingly considering and moving towards a recurring fee model where customers subscribe to consistent access to product and services, instead of making one-time purchases of goods and services.
Close to half or 46% of the 580 executives polled in Citi’s study believe that subscription-based models will be widespread in their respective industries in three years’ time and nearly a third - 31% - envision that 100% of their organisation’s revenues will come from these models in the future.
Commissioned by Citi’s Treasury and Trade Solutions business in partnership with Longitude, a Financial Times Company, the study titled 'Signing up to the subscription economy: The race for recurring revenue in Asia Pacific' polled executives across 14 markets in the region.
Respondents polled for the study comprised C-suite leaders and executives in digital transformation and technology, and finance and treasury roles across the following sectors - insurance; energy and power; consumer goods and healthcare; technology, media and telecommunications (TMT); and industrial.
The surveyed executives work in businesses that are at various stages of implementing a subscription-based model and over half, or 54%, work in firms earning annual revenues of US$2bn or more. The remainder represented firms with between US$500m and US$1.99bn in annual revenue.
In the consumer goods and healthcare sector, 50% of respondents believe the subscription-based model will be widespread in three years’ time. In TMT, 55% of respondents indicate that the model will be widespread within that timeframe while 44%, 40% and 42% echoed similar sentiments in the energy and power, industrial and insurance sectors respectively.
Drivers of the subscription-based model include expected long-term revenue growth and more advantageously, strong customer retention and loyalty. A vast majority - 82% - of respondents also view the shift to a subscription-based model as an opportunity to be a lead disruptor in their industry.
Of the respondents who are planning to implement subscription-based models, 76% anticipate a positive impact on customer retention and long-term customer relationships. A total 71% also anticipate positive impact on long-term revenue growth.
While respondents polled are at various stages of implementing a subscription-based revenue model, only 4% have in place a clearly defined, enterprise-wide subscription strategy. Barriers to the implementation of a subscription-based model include a lack of understanding and familiarity of the model, concerns over a short-term decline in revenue, the need for new finance and accountability processes and structures, and the need for alignment across the whole organisation.
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