July 13, 2015
sim card with phone

We are witnessing a shift in business models as our society increasingly turns away from traditional ideas of commitment and ownership. Think about it; if you want to go to the gym, would you rather sign up for a whole year or just pay one month at a time? Everywhere you look, you can see businesses beginning to cater to a no-strings-attached style of consumerism.

 

Contracts? Who wants to commit to that?

We are seeing more and more evidence that Millennials, the rising generation of young adults, are shy of commitment. They are putting off owning their own homes, getting married, and having kids for longer than previous generations. They also do not like signing contracts, as phone carriers are discovering. T-Mobile was the first of the major U.S. cellphone companies to catch on and offer no-contract plans, but the others have followed suit. Rather than signing their names at the bottom of a two-year service plan, consumers are showing a marked preference for prepaid plans.

Voice over Internet Protocol (“VoIP”) providers like magicJack offer another kind of commitment-free service. Using your existing high-speed Internet connection, or even the 4G or Wi-Fi connection on your cellphone, magicJack offers a range of pay-as-you-go options that can help keep phone costs less than $3/month. Purchase an inexpensive device and then prepay for a specific service duration, ranging from one month to five years. Since the plans are prepaid, you never have to worry about monthly fees or surprise charges on your bill. As many other companies are discovering, magicJack knows that its customers are looking for services that are contract free and up front about pricing.

This shift is becoming prevalent in other industries, including television. A new service called Sling TV is responding to the changing market by providing an inexpensive service that streams cable channels over the Internet. Users pay a monthly fee for a basic package, but can then add on additional channels for a small fee. Like the popular prepaid phone plans, Sling TV requires no contract, no commitments, and allows users to pick and choose what services they receive.

 

Ownership reconsidered

Another emerging trend is a declining emphasis on physical ownership. This can be seen in a growing preference for virtual, rather than physical products. Mindshare reported at the beginning of 2013 that nearly 50% of consumers were downloading music or video content at least once a week. Much of the younger population is turning away from the idea that they need to own the physical copy of books, music, and movies. As reliance on the Internet and mobile devices grows, society is becoming increasingly comfortable with the concept of virtual ownership.

Businesses are responding by creating greater range of devices and services capable of providing virtual content. While smartphones and tablets are ever present, this is a market surge in wearables, including smartwatches, which can stream music, download books, track fitness, and much more. Services like Amazon make it easy to download TV shows, books, and songs without ever having to purchasing a physical copy.

While many of these changes seem to be stemming from the commitment-phobia of the millennial generation, their influence is quickly spreading to other consumer groups as well. As a whole, society is turning away from the traditional ideas of what it means to purchase a service or product. Consumers and increasingly knowledgeable and have discovered that long-term contracts are usually in the best interest of the company. The business world is adapting, as it always does, to the needs of its consumers by requiring less commitment and meeting the demands for more digital content and devices.