Subscribing to a New Mindset

The shift to an engagement economy requires leaders to rethink old assumptions about revenue and customer loyalty

Subscription is an irreversible trend. But how quickly companies move – and succeed – depends on their appetite for risk and the agility of their leaders, says Saurabh R Gupta, Asia Pacific Consumer and Healthcare Sales Sector Head, Treasury and Trade Solutions at Citi.

Manish Kohli

Saurabh R Gupta,
Asia Pacific Consumer
and Healthcare Sales
Sector Head, Treasury
and Trade Solutions, Citi

Subscription isn’t a new idea.


“Go back 50 years and milkmen used to leave bottles on your doorstep each morning. The lunchboxes that are now delivered to office desks each day are based on services that have been operating for more than 100 years in India – the service has just been digitized. Why are we seeing such strong momentum now? Two reasons; businesses want to move from CapEx to OpEx and consumers want the ability to choose and switch service providers at speed.”

Saurabh R Gupta,
Asia Pacific Consumer
and Healthcare Sales
Sector Head, Treasury
and Trade Solutions, Citi

Industries are adopting subscription at different speeds.

“Subscription is an evolutionary journey. The inflection point has already come for consumer industries, such as cosmetics and retail. It was critical for many brands – if they didn’t move to subscription, they risked being overtaken or completely disrupted. In the industrial world, it hasn’t happened yet in a meaningful manner. And one of the big reasons is that these sectors are very capital intensive. Disrupters have a barrier to entry, which has prolonged or encouraged the existing players to retain their existing strategy.”

You need to be digital, from front to back.

“If a consumer is buying on a recurring basis, a human interface can’t serve their needs. Everything must be digitally managed 24/7. As we move from a direct economy to an engagement economy, companies need to think about the overall experience, from payment through to supply chain. I think that most organizations right now, while they embrace disruption and collaboration, the interaction between finance and the rest of the business is very reactive. That has to change.”

Sometimes people can’t accept cultural change.

“Once you go down this journey you are changing a hundred-year-old tradition of distribution in most companies. The majority of businesses are used to distributing a product. But we now selling a repeat engagement. So, the mindset of the traditional salesperson in most of these companies, however disruptive they are, has to change.”

Changing the quarter by quarter mindset.

“The CFOs who are good at leading a shift to subscription have a strong understanding of success in three areas: finance, technology and innovation. Those that do are very active in leading conversations with the C-Suit and are more confident about taking a short-term hit on revenue. They will embrace the fact that over the medium term, it will bring consistency and stability to their topline.

The move to subscription prompts firms to consider their risk appetite. Are people actually afraid of showing their stakeholders what is happening in the market? We know that the subscription model hasn’t been mastered yet – some will fail and some will make progress. Are boards ready to take that little bit of risk?”

One of the key drivers of adopting a subscription model is the need for structural data.

“Often in the world of e-commerce, the data does not come back to the original seller and is held by the marketplace. And without analytics, the finance department can’t make useful predictions. Subscription helps you connect with the consumer and gives you real-time access to their demand. This data will enable what happened many years back with just-in-time supply chains. The subscription economy will bring justin- time for consumers on the sell side. They’re already on the procurement side, and the subscription economy enables it on the sell side, because people will be able to estimate and anticipate demand.”

We need to talk a little bit about Asia.

“According to research from Nielsen, 23% of APAC consumers are already using an online subscription and 37% are willing to do so – both of these are above the global average.

Asia is seeing a larger trend, or even jumping the global trend, because we have a larger Millennial middle class. The region is bucking the trend because Asian companies are deploying chief digital officers and chief innovation officers who read and understand this group of consumers, and who are inspired to go to their management and say “This is what we are seeing on the ground, we need to respond and engage.”