Dr Steve Cassidy, managing director at Viaqqio, explores how the subscription economy is transforming the travel industry.
Brits have traditionally been focused on owning things – from cars to record collections. However, the ‘ownership’ obsession is on its way out and is paving the way to the subscription economy. The rise in this non-ownership culture is changing the way people interact with businesses and their surroundings. At the heart of this shift are people who are happy to subscribe to the outcomes they want, when they want them, without an outright purchase.
Our expectations have changed drastically: on-demand services increasingly sit at the top of consumer lifestyle essentials, with the likes of Spotify and Amazon Prime creating new business models which are leaving competitors behind. They marry on-demand instant services with personalised recommendations all informed by other users’ recommendations and the easiest, manageable subscription models.
Importantly, these services are built upon an aggregation of third party sellers into an easily accessible marketplace, be they Amazon retailers’ products, music company recordings or films. This could be seen as a threat to third party providers as they are then challenged to give consumers what they want, at the right price and with the service levels they demand.
However, it is also a real opportunity to reinvigorate these third parties and grow the total marketplace for all. Music streaming provides a good example. Following the music industry’s catastrophic collapse in the late 90s, Spotify resurrected sales through its subscription-streaming model, turning the industry profitable once again. Reports indicate the retail value of music subscription-streaming services has hit $1bn in the first half of 2016, up by more than $500m in just one year.
The mind-set of modern day consumers has changed, and it’s not just in the consumption of entertainment, but almost every aspect of life. The movement away from ownership will see the subscription culture transform an array of industries, with transport next on the consumer agenda.
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The shift in transport
This shift towards the transport service model – or Mobility as a Service (MaaS) – is being driven by two mutually reinforcing trends. Firstly, there is the generational shift to the sharing economy. Millennials are technology natives who have lives built on networking and sharing. This has seen companies such as Airbnb and Deliveroo flourish and has now extended its reach to transport with BlaBlaCar, Zipcar, Enterprise Car and JustPark emerging and growing. The modern-day traveller now expects transport to be easily accessible, convenient and seamless.
Secondly, the growth of mobile and wireless connected devices in home and pocket, coupled with fast connectivity speeds, has catalysed this generation. This light infrastructure enables on-demand internet based choice and booking wherever or whenever needed. Add real time traffic updates, delay notifications, platform alterations and intelligent journey planners, and the full mobility service economy is now available at the tap of a smartphone screen.
The next stage – the truly fundamental shift in the transport service model – will be the bringing together of all the siloed transport, buses, taxis, trains and car clubs, into a full subscription MaaS service.
This type of service is beginning to take shape: in Birmingham, a trial called Car Freedom is providing a one stop service to older people. The service matches them with the right mobility and provides all the support they need (including customer service and peer-to-peer support), when they receive a concessionary pass; transitioning to reducing their car use or giving up the car completely. A similar service, PicknMix, is being designed by young people, to offer the same support for their own mobility transitions. Whim, a Finnish app aims to provide packages of mobility to suit all needs without the need to own a car.
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A shift in the UK?
The UK transport industry is on the edge of a fundamental shift to an integrated service economy. There is still a need for infrastructure spending and upgrades but the focus must now be to obtain the most from that infrastructure, managing demand and pulling the whole transport system together to attract and retain new users.
This requires a fundamental shift to service and support – only made possible by placing the user at the heart of design. New ways of packaging transport, delivering support, creating transport marketplaces and having integrated ways to pay, including subscription models can match changing and evolving needs. The requirement to own a car will reduce and ultimately become a thing of the past. Spotify has excelled by identifying a culture shift and addressing the change with a solution which worked for the user, ultimately growing the market for music and rejuvenating an entire industry. Transport must now follow.
Where are we going?
A major step toward this required level of change is happening right now as The Bus Bill continues its way through the House of Lords. It will see local authorities in England and Wales given the power to franchise its bus services. This will enable them to set routes, frequencies, pricing and quality standards that can support local residents.
This Bill will allow the often confusing price structures and route layouts to be simplified and enable Oyster-like smart ticketing. This will allow MaaS to flourish by making it easier to embed such stable public transport services into a package of mobility.
The transport industry is going places; however, it must move to the subscription economy to take that large leap forward. With the right package of transport, combined with personalised support, the mobility service subscription-based economy can grow the market for non-owned transport and consign the term ‘public transport’ to the history books.