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What is a Subscription-Based Business Model?

Subscription-based business models have become the new normal for businesses selling software and online services like streaming. The consumer pays a recurring fee in order to continue using the service or software. However, subscriptions can also apply to physical products, and have done so for many decades. For example, you can subscribe to a daily newspaper or for regular deliveries of your favourite magazines. 

Subscription is a model that can benefit both the buyer and the seller in several ways. Let’s examine this in detail to see how subscriptions are used and how they can be helpful. 

Subscription-Based Business Model Examples

Most people will think of subscriptions like Netflix or Amazon Prime when talking about the subscription-based business model, but there are some surprises in store. You can subscribe to anything from deliveries of meat or farm-fresh veggies to regular packages of cosmetics samples or beard care products. 

Membership of certain organisations is also conducted on a subscription basis. For example, you might subscribe to a trade organisation, with your dues entitling you to use the organisation’s logo, attend events, benefit from industry-wide marketing, and receive industry-related news and information. 

Benefits of a Subscription-Based Business Model

Customer Benefits

Subscription-based models offer advantages to consumers. Convenience is one of these. For example, you can get your favourite magazines delivered to your door instead of having to hunt for them at your local newsagents. 

They can also offer opportunities to try new things for less. A wine of the month club may send you a bottle of wine you wouldn’t otherwise have bought, but find that you like, for example. 

Besides this, subscriptions can keep you up to date with the latest and the best iterations of a product or service without you having to lift a finger. As a subscriber, you receive updates as a matter of course. 

Businesses Also Benefit

Subscription-based businesses have predictable revenue streams, and every customer who signs up becomes a repeat client for as long as they continue with their subscription. Since customers automatically continue subscriptions unless they take action to cancel them, there’s a good chance that they won’t move to competitors. So customer loyalty is almost a given, as long as the subscription service delivers on its promises. 

With customers buying on auto, the lifetime value of each customer may be considerably greater than it would be if they had to trigger every repeat purchase themselves. There’s also a sense of “belonging” among customers who are subscribers. They’re ready to engage with the business, and if they’re happy with their subscription, they may even recommend it to other people. 

Finally, a subscription-based business has fewer peaks and lows and subscription businesses offering physical products are better able to forecast how much inventory they should have in stock at any given time. 

How to Build a Subscription-Based Business Model

The success of subscription-based business model ideas depends on what benefits you can offer to your customers. Put yourself in their shoes.

For example, you might take out a yearly gym subscription if that means your monthly fees will be lower. If the gym doesn’t offer better rates or perks for yearly subscriptions, you’re more likely to settle for a monthly membership – and if that doesn’t cost you less than just paying when you actually go to the gym, you might not even opt for a monthly commitment. 

So, the first thing you need for a successful subscription-based model is a clear benefit for your subscribers. Most subscription-based businesses rely on curation, replenishment, or access. 

Curation subscriptions mean that customers get products chosen by experts. For example, a wine of the month club uses trusted wine connoisseurs to choose wines for their customers. Subscribers don’t need to know a lot about wine to get the best wines on the market, and they don’t have to worry about making mistakes in their choices. 

Replenishment subscriptions give you the same products at intervals. They’re things you would ordinarily have to remember to add to your shopping list and then go out and buy. If the products arrive automatically, you have a constant supply without having to go to any effort. That’s a definite benefit!

Access-based subscriptions are typical of software subscription businesses. Their customers can access and use the software as long as they have an active subscription. But they can also relate to other business types. For example, a subscription may entitle a customer to specific perks like discounts, or access to products that aren’t available to the general public. 

The basics of building a subscription-based business are therefore offering a product or service that people will continue to want and a compelling reason why the subscription will be of benefit to your customers.

Subscription-Based Business Models Have One Thing in Common

If people are interested in it, it may be open to a subscription-based business. From serious subscriptions for business services to quirky subscriptions like a monthly supply of doggie treats, you may be surprised by the sheer range of subscription businesses out there.  However, there’s one thing that all subscription-based businesses have in common, and that’s the need for excellent customer service

When you have a subscription-based business, you have promises to keep, and customers with high expectations of the benefits in store for them. Since the potential for customer retention will be among your primary reasons for conducting business via subscriptions, you’ll need to take very good care of your clients. 

As your subscription business gains popularity, you may need some help keeping up with customer expectations and demand. Your mail room must run smoothly, returns must be processed efficiently, and customer questions must be answered professionally. 

Should you employ more staff and move to bigger offices? It may not be necessary when you choose RSVP for back office support services and customer care. We’re geared to nurture your customers and deliver on your promises – and you get to stay in charge the easy way. Contact us today and get our team on your side. 

 

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