The Subscription-based Business
The subscription-based business model is a business model that charges customers a recurring fee — typically monthly or yearly — to access a product or service. The products that subscription businesses sell are usually consumables or licensed products that can only be used for a finite amount of time
This model gives businesses recurring revenue that can serve as a backbone to survive pandemics or other unforeseen circumstances on one hand, and allows customers to consume quality products for a finite amount of time, on the other hand.
People are always willing to pay more for the flexibility of their comfort. With recurring revenue, running a subscription business can be more secured than your 9-to-5 jobs. Every subscription-based business, such as gym membership and Netflix, has its unique content, advantages and disadvantages.
In this guide, you will learn what, why and how you can adopt a subscription business model.
What is a Subscription Business Model?
The subscription-based business model is a business model that charges customers a recurring fee — typically monthly or yearly — to access a product or service. The products that subscription businesses sell are usually consumables or licensed products that can only be used for a finite amount of time
What is expected of a subscription based business owner?
Although the subscription business model is incredibly popular, it doesn’t mean that starting a subscription company is easy. With a heavy reliance on recurring customer relationships, the subscription model requires constant focus on providing long-term value. Providing that level of consistent and compounding value can happen only when businesses understand their customers inside and out.
As a subscription revenue owner, your priority should be to always provide massive values and offers to keep your audience on your business. This is very crucial. There must be harmony between you and your customers. People want convenience, fun and ease, but the importance of customer acquisition and retention are highlighted by a subscription business.
You have to do everything within your power to nurture and build their trust when acquiring customers. It takes time to earn a profit from the subscription business since you are likely to sell your products and benefits at cheaper prices in subscription companies. However, statistics have proved it to be lucrative with a few loyal customers. In this guide, you will learn what, why and how you can adopt a subscription business model.
Example of a Subscription Business Model
The easiest subscription business model to understand is that of a magazine company. Instead of selling a magazine as a standalone product where a customer makes a one-time purchase, magazine companies offer a subscription service for the delivery of a weekly or monthly magazine. In this model, instead of having customers make single purchases, magazine companies offer monthly payments for a yearly subscription to access their monthly magazines.
If a magazine company offers a monthly magazine service, instead of as a single magazine purchase, it offers its service as a 12-month service comprising 12 purchases. This makes the revenue model of the company stronger because it guarantees itself sales over a 12-month period rather than a single purchase. This makes revenue forecasting and business planning easier since a company can project its sales farther out with more accuracy.
Magazine companies are not the only model that uses a subscription business model. With technology, almost any product or service can now be a subscription model.
Why start a subscription company?
Benefit of Recurrent income
Recurrent revenues make your business predictable. You can track your sales as a business owner, usually, it conveys to you a starting line for determining whether you have stock at the end of your month, contrary to other businesses where a success threshold must be met to pay your staff and cover bills.
There is broader range of customers
A subscription product lets you reach an even wider spectrum of consumers. You can reach a wider range of audience by using a subscription-based product. All you need to do is to inspire the next subscription, anticipate the upcoming announcement, which allows your customers to sign and commit their loyalty to you. You have to do everything in your power to nurture and build your trust when acquiring customers.
It is Convenient and flexible
You are not restricted to one place by the technological instruments in place. If you are a greatly talented person, you can earn as much as you want within one month as you want, by the presence of some loyal customers and another firm. Subscription companies are great for the management of cash flow and also allow business owners to track behaviour.
Before you develop a business model for subscriptions
Please select a niche
It is important to choose a niche that will be of authentic interest to you, it can be any product because there is recurring revenue and it pays to offer consumption, before starting any enterprise.
Identify your target audience, your market
It’s crucial to figure out who your target audience is. It clarifies the type of information that people should consume. You must be aware of the differences in people’s tastes and speak your audience’s language strategically.
Select a pricing system
The price system is the first thing people notice after seeing a product; anything you’re selling must be priced at a level that your buyers can relate to. If you try to make it cheaper, some people will refuse to buy it because they believe it isn’t rigged.
Make a stronger relationship with your clients
It’s fantastic to have a product that people want to buy, but nothing beats connecting with customers. Customers only buy from individuals they can trust, therefore look into practical strategies to create a customer relationship.
Make use of Google and capitalize on popular products
Customers will look forward to their next subscription if you communicate with them about your product. You can do this by telling a story or sending handwritten letters. Allow them to have faith in you as a brand. People are quick to change their habits of buying from a brand if they don’t perceive any need to do so, thanks to the advancement of technology. There must be a solution.
Develop a referral system
Referrals are more effective than content production if you can make a positive impression on people, persuade family, friends, and customers to refer you, or use an online system to pay for a lead generation advertisement. Start with 3-5 products that will fit in your box, are light in weight, and will save you money
