Subscription models can be a fantastic way to generate more income and offer more value. For customers, it can offer more convenience and even be a great way to discover new products and services that they haven’t heard of. But when does it make sense to turn your business into a subscription model? Can it coexist alongside your existing business models and forms of income? Get ahead of the game in 2023 with our guide on how to implement a successful subscription business model. Let’s take a closer look.
What is the subscription business model?
Before we begin, let’s clearly define what a subscription business model is.
When you have a subscription business model, it means that you offer a service that allows people to pay each month to receive some kind of benefit or service. For instance, you might have a subscription model as an online confectionery store that sends customized boxes of treats to customers. However, a subscription model could also be paying for access to use an application or service that you offer.
Subscription models have historically been seen as something that ambitious businesses use to raise their profits while also making it easier to forecast profits. However, businesses are starting to look at them in terms of the benefits it offers customers as well.
What are the benefits of a subscription model?
So what exactly should you expect from the subscription model? Let’s take a look at it both from the eyes of customers and businesses.
Benefits for customers
- They’re convenient for customers since they get repeat products or access to a service for a small price. In many cases, subscription models are used to give people access to expensive services for a limited time, such as industry-grade software tools.
- It makes it easier for customers to discover new products in your range.
- Subscription models are usually a much lower investment than outright buying something.
- Subscriptions can make it easier for your business to attract new customers.
Benefits for businesses
- It makes forecasting profits and service demands a lot easier.
- It stabilizes your company’s income.
- It helps you build a larger customer base while minimizing the customer acquisition cost.
- This is a service that can be added to your existing offerings.
As you can see, there are a number of fantastic benefits from the perspective of both your business and from the customer’s point of view.
When should you not use a subscription business model?
While a subscription model makes sense for a lot of businesses, it’s not something you can apply to any business. There are plenty of companies out there that work best without subscription models, but how can you tell if that applies to you?
In general, the biggest sign that you shouldn’t offer a subscription model is if you don’t have a way to provide recurring services and products to your customers. For instance, if your service is something that customers use once or twice a year, then offering a subscription model seems a little pointless. Similarly, if you only offer a handful of products, then you can’t really offer subscriptions as a way for your customers to discover new products or gain cheaper access to them.
What conditions should you meet before offering a subscription model?
There are a couple of conditions to consider before you start offering a subscription model. For instance, you should have the technology and staff available to help you implement a subscription model for your business. For instance, this is a great option for subscription payments and you should also consider if you need to hire someone new to create and send monthly boxes to your customers.
You should also consider if your services or products are generally too expensive for someone to buy outright. If you have a way to offer a consistent stream of whatever you’re offering, then your business might be a good candidate for offering a subscription model. For example, you could offer a subscription model for an expensive piece of hobby equipment, but you’ll need to introduce terms and conditions in the event that the customer can’t return it.
Some closing thoughts
Subscription business models can be effective in the right conditions. However, it’s important to remember that you can’t just copy what another business is doing and expect it to work. Subscription models for your business should be in demand before you set up the infrastructure for it. You should also consider the changes you need to make to your business in order to better facilitate a subscription business model.
If you meet the right conditions for it and feel like it could be a benefit to your business, then a subscription business model can bring a lot of great advantages.
