Subscriptions: success cases of Decathlon & Traton

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the subscription model has permeated diverse industries, ranging from software to physical products. Find success cases and deep dives below from the corresponding chapter written by Michael Mansard and Pierre Yves Noel in the new book Pricing Decoded.

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Subscriptions: success cases of Decathlon & Traton

In sectors like software or media the Subscription Economy has become the dominant paradigm from a revenue model perspective in less than two decades. In fact, digital attackers and “subscription-natives”, such as Spotify or Zoom , have pushed established players such as 纽约时报 or 微软 to embrace the models.

Today, the subscription model has permeated diverse industries, ranging from software and media to healthcare, consumer services. The adoption isn't confined to digital products; it includes physical products such as bikes, or IoT-enabled services from connected products that provide added-value services, such as asset tracking or predictive maintenance.

Success reasons

The substantial growth and accelerating adoption of the subscription economy can be attributed to several key components reshaping the landscape of consumer behavior and corporate strategies.

First, the cornerstone of the subscription model's ascendance is a significant shift in consumer behavior. People are generally becoming more digitally savvy and less inclined towards ownership. In fact, 68% of adults across the globe believe that a person’s status is no longer defined by what they own. So instead of owning products, customers want flexible access to services that adapt to their ever-evolving needs. Subscribing and using services instead of owning products sets people free from hassles, maintenance costs, and constant upgrades.

Digital services for instance, are natively subscription-based nowaday. Let’s take ChatGPT as an illustration. For the vast majority, it would be unthinkable to buy your own technical infrastructure, train your own large language model, or install a bot on a home server and all these efforts for questionable results. OpenAI provides a directly leverageable solution, with different levels of subscription, aligned to users needs, including a free entry level. And it can occur in the world of physical products. This paradigm shift is not just a fleeting trend but a fundamental change in the consumer psyche, valuing experiences and convenience over the traditional pride of ownership.

Then, this shift towards subscription models has been greatly facilitated by technological advancements. The explosion of the Internet of Things (IoT) and the advent of faster network technologies like 5G have created a fertile ground for these models to thrive. These technologies enable businesses to interact with consumers at an unprecedented scale, gathering valuable insights that drive efficiency in both delivery and management of services. The resulting data is the lifeblood of subscription services, allowing for tailored experiences, predictive analytics, and improved customer engagement - as the TRATON RIO “spotlight” featured below.

Another catalyst that fuels the acceleration of subscription-based models is the outbreak of crises, such global economic turmoil or recent pandemic, or high inflation that started in 2021. As a matter of fact, the 2001 “Dot Com Bubble” and the 2007 “Financial Crisis” surprisingly match with inflexion points in the Subscription Economy, respectively SaaS and Media. Subscription models are relevant models in times of uncertainty - as customers are often more constrained in terms of investments and ability to commit. A minimal threshold for entry, coupled with a lower level of commitment and the ability to easily change subscriptions — including upgrading, downgrading, suspending, or resuming services — becomes crucial for consumers.

Subscription models offer predictability in revenue, which is a highly valued trait in financial planning and valuation. As striking illustration: 70% to 80% of subscription business revenues come from their existing subscribers according to the Subscribed Institute. Steady, predictable revenue streams facilitate better resource allocation, risk management, and strategic planning and ultimately driving predictable earnings too!

Subscription spotlight: Decathlon

Decathlon, the world's largest sports retailer, has been trialing and accelerating with multiple subscription initiatives across the globe. One of the most compelling services is called "Btwin Kids," a subscription service for children's bikes, designed to address the problem of quickly outgrown bikes and reduce environmental impact.

Indeed, many parents often keep well-functioning kids' bikes idle, even after they've become too small or outdated for their children. This offering, starting at €3 to €8 per month, encompasses not only the use of children's bikes but also incorporates comprehensive services like maintenance and insurance. Importantly, it offers the flexibility to swap bikes, ensuring children always have access to appropriately sized bikes as they grow, enhancing the convenience and practicality of the subscription.

The success of this pilot has led Decathlon to expand the subscription service across geographies, but also across more product ranges.

Subscription spotlight: Traton

With its brands Scania, MAN or Volkswagen Truck & Bus, TRATON is one of the world’s leading commercial vehicle manufacturers. In the logistics space, there is a larger number of small fleet operators. Small fleets often lack digitization, while operating mixed brands fleets, generating areas of inefficiencies.

The TRATON RIO platform is a cloud-based solution that consolidates services for fleet managers, freight forwarders, and vehicle rental companies. It offers digital services and solutions for trucks, vans, and buses, independent from the specific vehicle brand. The RIO platform helps collect data from telematic/IoT devices and other external sources to provide real-time information such as vehicle position, current status, tachograph status, speed, engine temperature or fuel consumption.

Some specific examples of the services monetized by the RIO platform are GPS tracking of freight, geofencing, maintenance management, monitoring driving times or route and order management. Those can be accessed in a self-service manner via RIO’s marketplace platform, with a transparent price per day and per vehicle. As a matter of fact, the RIO platform collaborates with Volkswagen Group Logistics as their cloud-based telematics operating system, managing about 18,000 truck moves a day across Europe.

Subscription is NOT a strategy

In the landscape of contemporary business strategies, it is imperative to recognize that subscription models, while increasingly popular, are not strategies in themselves. They are tactical elements within a broader strategic framework. This understanding is critical for businesses contemplating the adoption or enhancement of a subscription model.

Subscription models are fundamentally customer-centric, recurring business models. They require an 'outside-in' approach: beginning with an understanding of the customer's needs, quantifying customer’s pains, followed by the development of a valuable solution. Initiating a subscription service without this foundational understanding may lead to "subscription-washing," where the model is adopted without clear alignment with customer needs or strategic intent.

Thanks a lot to Michael Mansard and Pierre Yves Noel for having shared the extract above on the subscription economy in the new book Pricing Decoded where you will find more insights and deep dives!

What is your view on subscriptions?

Interested in learning more about subscriptions? You will find subscription insights in the books The Pricing Model Revolution and Pricing Decoded.

‘There are many books on pricing. The Pricing Model Revolution is the best read for managers wanting a review of several innovative pricing methods’. Philip Kotler, S. C. Johnson Distinguished Professor of International Marketing, Kellogg School of Management, Northwestern University

Get your copy of ‘The 10 Rules of Highly Effective Pricing’ here.

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You are most welcome to share your views, feedbacks and own pricing experiences. Thanks a lot for your interest and support!