The message is getting through. 70 per cent of one-time payment businesses are looking to migrate customers to recurring subscription models in the next two-to-three years.

In an era of business transformation, companies are typically evaluating their business models to look at stickier service based offerings.

Now, new research from Ovum (and coincidentally sponsored by a company selling subscription software solutions) shows Australians and New Zealanders spend an average of $660 AUD per month on subscriptions or recurring goods and services.

The authors said Generation-Z (consumers aged 14-25) is expected to lift the Subscription Economy’s annual market potential in Australia & New Zealand (ANZ) from $2.4 billion to $2.62 billion in the next four-to-five years.

The survey of 100 enterprises and 300 consumers in Australia and New Zealand (ANZ) was conducted by Ovum Research for Zuora, the world’s leading provider of subscription billing, commerce, and finance solutions.

“Consumers wanting greater control and businesses seeking recurring revenue and a direct relationship with their customer are together creating fertile grounds for this movement towards subscription-based models,” said John Kearney, Managing Director, Asia Pacific, at Zuora.

“Globally, there is a massive shift underway in the way we —as both consumers and businesses —are looking to consume goods and services. We now value the convenience and flexibility of subscribing to services rather than buying products outright.”

While less than one in ten businesses (8 per cent) surveyed had a subscription billing system, two-thirds (65 per cent) of businesses plan to spend an average five year budget of more than half a million dollars to deploy this technology.

“Compared to the US and Europe, Australian business have been relatively slower to embrace subscriptions or develop a hybrid customer engagement model that can enhance average revenue per user,” said Kearney.

“In the ANZ region, media and entertainment contribute more than one-third (38 per cent) of total subscription revenue, but we’re beginning to see strong growth from software-as-a-service (SaaS) companies plus emerging subscriptions-based business within health, education and financial services.”

Despite the positive business sentiment towards subscription-based models, the survey highlighted more than a quarter (27 per cent) of consumers were dissatisfied with their current subscription. Lack of flexible options and high cancellation fees are reported as being the major pain points for customers.

Kearney said companies moving to a subscription model should be focused on simplicity and adapting a ‘customer first’ strategy.

“Creating a robust user-friendly experience, and ease of access to unique goods and services, are crucial factors for positive customer sentiment. Big business has to be on top of pricing and packaging as a strategy to secure market share. Learning from the media industry, including leaders like Fairfax, and from many others around the world, simplicity is going to be key, particularly for the business-to-consumer space.”

Kedar Mohite, Senior Analyst, Media & Broadcast Technology at Ovum, said the survey points to a shift from nascence to growth within the Subscription Economy, assisted by a surge in adoption by Generation-Y (ages 26-35) and the Silent Generation (ages 71+).

“Close to a third (32 per cent) of existing subscription customers are new users who have been utilising subscription services for less than 12 months. In the Netflix era, Generation-Z has been the core global driver for subscription-based goods and services and the ANZ market is no different,” said Mohite.

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