Since upending the global economy, Covid-19
has prompted businesses to an
unprecedented pivot to digitalization.
Small and medium-sized businesses (SMBs)—which contribute half the world’s GDP and employ two-thirds of its workforce—are the most vulnerable to prolonged disruption.
For them, digitalization has become a necessity for survival, with 70% of SMBs across 14 Asia Pacific markets ramping up transformation amid Covid-19, a 2020 IDC survey commissioned by Cisco showed. IDC found 90% of SMBs became more reliant on technology and over 80% believe digitalization will make them resilient to future upheavals.
As the “new normal” morphs into the “next normal” of a post-pandemic world, SMBs are reimagining existing business models and applying tech-driven approaches to reach customers digitally.
Today’s digital customers are not only spending more time online and shopping via apps on their mobile phones, but technology has also reshaped how they view products and services. They favor flexibility of accessing experiences when and where they want via subscriptions over outright ownership and are responsive to businesses that engage them through social media.
Subscriptions: Ending Ownership
In the heyday of print media, newspapers and magazines sold subscriptions to lock in revenue for fixed periods. Now, businesses as diverse as entertainment, ride hailing, groceries, fitness, education, and fashion, have reimagined subscriptions to generate revenue growth by offering users an array of flexible options.
Billing software provider Zuora has dubbed this new era as “The End of Ownership,” where individuals seek “fulfilling experiences that enrich their lives” over “the status and ephemeral personal fulfillment that came from owning things.” This has created a new ‘Subscription Economy’, with businesses in Zuora’s Subscription Economy Index (SEI) outpacing growth in traditional business models by five to eight times. In the fourth quarter of 2020 alone, Zuora estimates companies in the SEI experienced seven times faster revenue growth than those in the S&P 500.
SEI experienced faster revenue growth than those in the S&P 500
The Subscription Economy’s growth in the Asia Pacific is outstripping other major regions of the world. After a contraction in the first quarter of 2020—as Asia Pacific was the earliest to be affected by the pandemic—subscription revenue growth accelerated as companies adjusted offerings. Asia Pacific not only recovered faster than other regions, it was also the only region in the SEI to record accelerated revenue growth, from 20% on average in 2019 to 22% in 2020, according to Zuora’s March 2021 update.
Asia Pacific was the only region in the SEI to record accelerated revenue growth from 2019 to 2020
Why Consumers Love Subscriptions
Subscriptions aren’t just used by entertainment and commerce giants. Many small businesses—such as customized headphones, personalized vitamins and skincare, and bespoke flower delivery—have succeeded by adopting subscription-based models.
Subscriptions provide greater convenience, more sustainable choices, and more importantly access to goods and services on a rolling basis, putting the latest offerings within easy reach.
Zuora’s Report states:
More than 78% of adults internationally had subscriptions in 2020, up from 71% two years earlier.
believed that in the future people will own fewer things and have more subscriptions.
Nura – an Australian startup that makes customized headphones – offers a subscription service, NURANOW to its customers in Australia, the US, and the UK.
“When the experience of a product category undergoes rapid innovation, people want to have the latest and greatest, rather than an experience frozen in time,” says Dragan Petrović, CEO, Nura.
“With NURANOW, rather than a large, one-time cost to purchase a product, folks can get access to the experience of personalized sound with a pay-as-you-go option.”
This model allows businesses to provide customers flexibility to pay for what they need and adjust service options, along with opportunities to upsell and cross sell. They also help to understand customers better through their subscription preferences, which can then inform marketing strategy, shape future offerings, and aid personalization.
Vitable delivers a customized supply of vitamins in compostable packs each month to subscribers. It uses digital technology to help consumers navigate the information overload by providing a personalized experience and flexible options.
“We leverage first-party data and technology to understand in real time, our customers’ needs and pain points, which enables us to build a strong customer-centric strategy to drive business growth.”
Similarly, Yours, a Singapore-based personalized skincare brand restocks its customers automatically and also auto-updates their skincare routines based on skin improvements or when seasons change. “We let users choose between one-time orders versus subscriptions based on their preference,” says co-founder Shivam Sharma. “There is, of course, a monetary incentive for the user to opt for a subscription, but we do see that a lot of users prefer choosing a subscription after they’ve tried a product.”
“That said, there are several benefits of a subscription model vs one-time-only: Recurring revenue, high customer lifetime value, customer loyalty, and multiple instances to build surprise & delight moments for customers, to name a few.”
Businesses have leveraged on subscriptions to gain competitive advantage. Through repeated and curated engagement, brands have used subscription models to change overall perceptions, build trust, and generate demand. kukka, a South Korean start-up, decided to change how flowers can be appreciated in everyday life and not just on special occasions. kukka’s “all-in-one flower tech innovation platform” sends subscribers flowers designed by a professional florist every two weeks.
“Subscription businesses allows a brand to maintain contact with a customer for a long period of time and be able to drive stable sales as you accumulate more subscribers.”
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subscription models work.
How Does a Subscription
Experience Work?
Some benefits of a subscription model: Recurring revenue, high customer lifetime value, loyalty, and multiple instances to build surprise & delight moments for customers. Learn how a subscription business can engage customers.
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GlowSugar through their ads
Subscription businesses can have a significant impact on a customer's lifestyle. The business model allows a brand to stay connected with customers consistently.
Help GlowSugar design a personalized
routine for your skin and beauty needs
A hybrid model allows customers the flexibility to choose between one-time order vs subscription. There’s a monetary incentive for the customers to opt for a subscription but many prefer choosing a subscription after they’ve tried a product.
Choose your payment preferences
Subscriptions put customers’ needs on auto-pilot. Businesses can send customers’ new products based on usage, reviews and even when seasons change. This way, customers don’t have to worry about reordering.
Customers must know that they are able to control their subscription end-to-end. Giving them choice of a trial of a great product will most likely convert into a subscription.
Some benefits of a subscription model vs one-time-only: Recurring revenue, high customer life-time value, loyalty, and multiple instances to build surprise & delight moments for customers.
Meta has been a key part of the success that’s driving Nura, Vitable, Yours, and kukka. It has allowed these businesses to reach potential customers, acquire subscribers, and build communities via Instagram where they can regularly connect. Through ads, they have also been able to re-engage with existing customers, get faster adoption during new product launches, and disseminate announcements at no additional cost.
According to Yours’ CEO Shivam Sharma, some of the key factors for a successful subscription model include “quality of the product or service, clearly communicating your value proposition, and giving customers control over their journey.”
“It’s important to have a data-driven approach to truly understand your customers, how your product fits into their lives, and to anticipate points of friction,” shares Dragan Petrović, CEO at Nura.
“APAC is home to some of the fastest growing internet penetration rates globally, particularly in Southeast Asia. Our data clearly shows consumers in APAC are more likely to want brands to offer personalized products and services, and this in itself is a prerequisite to brand loyalty in the region,” says Chase Buckle, Head of Global Trends, GWI.
“A key challenge for firms interested in this model lies in ensuring subscription businesses have the data capabilities in place to gain sophisticated insight into their customers and create new value for them.”
While the subscription business model is not new, as more consumers prefer less ownership in an increasingly digitized world, subscriptions are growing in importance across diverse industries and markets. “A subscription offering can be appealing for brands as it provides a more consistent relationship with customers that goes beyond just a one-off transaction and can result in more reliable revenue streams,” says Karen Teo, VP, Global Business Group, Meta.
Mobile Apps: Gateways to Personalized Experiences
Last year, unique mobile phone subscribers numbered 5.2 billion, or 67% of the global population. The GSM Association forecasts this number will reach 5.7 billion in 2025, or a 70% penetration rate. Mobile internet users are projected to jump from 4 billion to 5 billion in the same period, covering 60% of humanity. In Asia Pacific, smartphone adoption is expected to climb from 68% in 2020 to 83% by 2025.
Today’s Mobile-First world is fast becoming an App-First World as consumers increasingly prefer apps to web browsers to access the internet. Apps are no longer a ‘nice to have’ widget to complement websites, but a ‘must get right’ businesses priority. Global tech company Criteo's 2020 Global App Survey of over 8,000 mobile users in Australia, India, Indonesia, Japan, Singapore, South Korea, Taiwan, and Thailand showed that app users in Asia Pacific have become even more dependent on apps to shop, connect with others, and entertain themselves. This increased reliance on apps is partly the result of lockdowns and social distancing measures resulting from the Covid-19 pandemic.
According to eMarketer, apps for grocery, food delivery, and health and fitness were the fastest-growing categories in 2020. As more countries start to reopen, app usage is set to grow as consumers continue to use apps for food delivery, shopping, and booking gym slots, among other uses.
Why Apps are Business Drivers
Why Apps are Business Drivers
Apps are a convenient way to explore products and services offered by businesses and enable users to create personalized experiences, with visibility across the customer’s journey.
Higher customer engagement through apps ultimately generates higher sales. Consumers spend more time on apps because apps are built with multi-layer security plan and faster checkout systems.
Appsflyer projects:
App-install ad spend to double from $57.8 billion in 2019 to $118 billion in 2022 as businesses run campaigns to get hundreds of millions of people coming online around the world to install their apps. Asia Pacific currently leads mobile app-install spending, highlighting growth opportunities as more companies adopt app-based models.
Consumer journeys on apps begin with user discovery, followed by consideration, with favorable verdicts resulting in downloads and ultimately to varying degrees of use. According to Criteo, while referrals from family and friends drove 46% of app downloads in the Asia Pacific in 2020, some 60% of downloads resulted from people seeing ads on social media, on other apps, and on TV. This makes app-install ads an indispensable marketing tool.
The consumer journey – whether for e-commerce apps or loyalty-based apps – is designed to lead people to desired outcomes, such as repeat purchases and brand loyalty. Apps offer consumers ease and flexibility as information is instantly available at the convenience of their fingertips.
Investment community platform Bibit saw a need in the market to make investment information accessible for Indonesians. Indonesia is currently the fourth largest smartphone market in the world. Statista reports there are over 180 million smartphone users as of 2020, and social media proliferation has increased daily time spent online.
“If we make investing easier, more accessible, or just one click away from an app, we could encourage first-time investors to invest in the capital market.”
“As a comparison, this trend is also captured by conventional banks. Conventional banks have now shifted towards mobile apps, in which users do not have to go to the banks or other brick-and-mortar shops again,” shares Wellson Lo, co-founder, Bibit. According to Lo, the number of mutual fund investors was only 248,000 in early 2016. As the landscape digitalized since, Lo revealed how in the first half of 2021, “more than 1.5 million new investors have started investing in mutual funds.”
Bibit analyzed that 91% of its users are utilizing e-wallets and digital banking. It optimized its digital ecosystem and allowed collaboration and integration with other digital players to make its user experience more seamless and convenient.
To date, Bibit has seen app installations grow by 307% since 2019, contributing to more than 50% of mutual fund investors.
“Facebook’s dynamic ads and other rich media have helped increase the number of Bibit app installs. When we communicate to our audiences on Meta, we use different types of creative content, so that we could enrich their perspective on the importance of financial literacy.”
Click to discover how app models can work.
How Do Mobile Apps
work?
Smartphones are integral in our lives and today’s digital ecosystem has made mobile apps the first point of access for information. Mobile apps, though varied in category, are specific in functionality. Users can choose what their devices can do. Learn more about how an app business can engage customers.
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SteelVault through their ads
Apps offer more flexibility than websites: they offer enhanced services and features within one device, adding value to consumers’ lives.
Download the mobile app
Users’ app usage patterns can be analysed to help inform and improve the app’s usability. Key indicators such as dwell time and conversion rates can also be monitored to offer more personalization.
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investment plan
Apps will give businesses control over their branding, security, scalability, and customer engagement and interaction.
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Users can set their preferences from the onset, based on which they will be served with customized content.
When the user experience is a tailored experience, this could lead to increased revenue as users become increasingly engaged.
To succeed, businesses must first stand out in a crowded app space to acquire new customers. Since its launch in December 2012, Babitalk has relied on Meta to drive app downloads and win signups among Korean women aged between 20 and 40 years.
“An app-based business model is superior to a web-based model in terms of enhancing customer retention and analyzing customers’ in-app activity patterns to provide optimized services for each individual.”
Babitalk, South Korea's No. 1 cosmetic surgery platform where more than 3,000 plastic surgery reviews and user posts are added daily. “Usage patterns can also be analyzed to improve the app’s usability and key indicators such as dwell time and conversion rates. Apps also offer more flexibility than websites in terms of incorporating more advanced services and features within the device.”
“Over the last two years, 160,000 installs were obtained using Facebook ads and about 80,000 users were reacquired. We have also been able to do refined targeting on Facebook to reach niche audiences.”
Meta’s Automated App Ads enable businesses to continuously grow their customer base with the help of AI-powered targeting and improved delivery models. With faster and more efficient campaign management, everything becomes streamlined, reducing the need for manual adjustments.
Customer journey is inextricably linked with the mobile experience. Both Babitalk and Bibit have emphasized how important it is to focus on the user interface design as well as the user experience design. “Underpinning everything is the need to ensure that you have a good quality product or offering,” says Shin Ho-tack, CEO, Babitalk.
As for Bibit, it provided smooth payment gateways through third-party payment service providers and ensured 24/7 customer support.
“Asia Pacific is a mobile and app-first market, and Meta and its technologies are one of the primary gateways for consumers to discover apps, products and services,” says Dhruv Vohra, Director, Global Business Group, Meta.
“Automated App Ads are designed to help app marketers of all sizes to achieve better performance from their ads more easily. Meta continues to innovate to connect this discovery generation with apps and businesses by providing seamless online experiences and helping businesses turn discovery into demand by meeting customers where they are.”
Pivoting to the Next Normal
In 2019, small and medium-sized businesses (SMBs) contributed $15.2 trillion, or just over half of the Asia Pacific economy, and IDC estimates that continued digital transformation of SMBs could add an additional $3.1 trillion to the region’s GDP by 2024.
However, this would not only require SMBs to invest in technology but also pick the right business models and strategies.
“As business leaders and marketers dread the impending loss of 3rd party cookies, digitizing your businesses with apps fortifies collection of first party data – a rich mine of insights into your consumer’s interaction with your brand,” says Ashik Ashokan, APAC Advisory Lead, World Advertising Research Centre (WARC).
“This is a crucial step towards creating a better value exchange with your consumers through better customer segmentation, personalization, and improved communications.”
As consumers transition away from owning things to buying experiences, being attuned and responsive to fast-evolving consumer preferences will enable SMBs to remain current and relevant to their customer base. Agility will be a key enabler in future-proofing businesses against an uncertain future.
