This week AirFrance became one of the first airlines to experiment with subscription pricing by announcing a new pre-paid travel product called Le Pass which allows frequent travelers to purchase pre-paid coupons to lock in pricing. A few days later, Mercedes-Benz followed BMW, Porsche and Cadillac by launching their own monthly all-inclusive subscription model, at a significantly lower rate ($1095 versus $2000 per month). The software industry also has increasingly converted most of their customers to annual subscription models … which all leads to the obvious question: why are so many brands trying to sell subscriptions?
The main reason for the popularity of subscriptions is us. Consumers enjoy the ability to always have the newest, best or most updated version of a product at a fixed rate. Why bother maintaining a car, or paying exorbitant rates for last minute flights, or using out of date software when you can pay a monthly fee for someone else to handle it?
Subscriptions work when the convenience is worth the extra expense (and it usually is more expensive). The problem is that increasingly we don’t have a choice anymore. If you wanted to buy Adobe Photoshop instead of paying a monthly fee forever to access it, you’re out of luck. So far, that only bothers a relatively small number of people. As more products move to this model, it will be interesting to see if this changes.