Recently, I worked on an assignment to study a case study of a company that has changed it's strategic direction to capture the 'non-consumer' part of the market share, that is the customers which otherwise wouldn't use their product due to a certain set of barriers. I chose Adobe to understand the barriers it was facing with the software model and how shifting to a cloud subscription model helped it expand it's market.
In last couple of years, Adobe has pivoted to a cloud-based subscription model from a conventional one time payment software purchase to capture more market size and nudge the non-consumers to choose their product. Below were the barriers they were facing to reach the non-consumers:
Novice creators couldn’t afford the one-time payment model of Adobe CS both financially and because they were not sure if they would continue to use it for a longer period
Users had to buy each software individually (for example, $699 for Photoshop)
Usage of few software’s had a steep learning curve
Users could use the software only in one designated system
Thus, summarizing below can be the barriers:
One-time hefty Payment (Financial Barrier)
Only available on one device (Access Barrier)
Seems Complicated to learn (Skill Barrier)
Perception that it can only be used by experienced creators (Attitudinal Barriers)
To prevent these barriers and further elevate their penetration into the non-consumer base, Adobe launched the ‘Creative Cloud’ service at subscription model ($59 per month) which worked wonders. Not only were they able to increase consumer base but also their revenue.
Novice creators were now able to afford the software given its monthly payments and could easily cancel it if they weren’t using it after a certain period
Users could buy the software both individually and as a bundle
Given the affordability and better learning experience, users didn’t mind investing in the learning curve
Users were now able to login to the software from any device, thus increasing convenience
People who may have formerly pirated or used products casually are paying for the service because it was perceived as budget friendly and valuable.
To sum it up, by switching to a subscription-based business model Adobe removed the big ticket fee from new users, increasing a new bunch of customers and simultaneously expanded the customer lifetime value of all their users. The customer base is known to have increased nearly 80% to 30 million subscribers.
References :
• https://prodesigntools.com/number-of-creative-cloud-subscribers.html
• https://knowledge.wharton.upenn.edu/article/adobes-shift-to-the-cloud-is-this-the-start-of-a-trend/
• https://producthabits.com/adobe-95-billion-saas-company/
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