Many industries are experiencing a big ongoing transformation in their industry. Disruptors are coming from nowhere and chasing the game.  

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For past 10 years, subscription model has been one of the most popular business models chosen by disruptors. And that’s not all. When it comes to company validations, you can see that subscription-based companies are also priced much higher than other business models. There’s no wonder many companies decided to join in on this trend.

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Nowadays, you can find subscription business models in almost every industry. Think about such players as Netflix, Microsoft or highly promoted by YouTube creators Dollar Shave Club – they have been using a subscription-based revenue model for years. And as you can guess, with much success.  

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Wanna hear some good news? Your company can also do it.

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Follow the article to find out what exactly a subscription business model is, how it works, and how exactly use it to benefit your business.

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What is a subscription business model?

A subscription business model is a recurring revenue model, with customers paying a weekly, monthly or yearly fee in exchange for your products or services. This model allows you to leverage your customer relationships to create a steady stream of income.

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Subscription-based revenue models can be beneficial for both the company and the customer. Customers have the convenience of automatically repurchasing a product or service that they know they’re going to need in the future. As a business, you keep your customers for the future with no need to re-engage them on a more frequent basis. You secure monthly recurring revenue (MRR), which can keep your business afloat throughout the difficult times.

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For the right product, brand, and industry, a subscription model can be a very effective and beneficial approach to running business.

How to Introduce Subscription Based Model in your company

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1. Figure out if your business would benefit from offering subscriptions

Before starting a subscription-based strategy for your company, you should decide whether a subscription model makes sense for your products and services. If you sell products or services that customers need to continuously access, then the answer is definitely yes. The same applies to products and physical items that customers will need refills. Day-to-day products, books, and snacks might qualify here.  

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Do your products or services fit that description? Well, excellent; move on to step two.

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2. Establish a goal for your subscription-based business

The right goal will guide your process when you’re creating subscription packages and pricing levels. You should consider if you’re interested in attracting high-value clients such as enterprise businesses, or do you want to increase your small-business client base? Or maybe you just want to access individual clients?

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You should also want to establish what your objectives are; do you want to boost sales for a certain product, grow revenue by a certain percentage, or increase customer retention?

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3. Choose a subscription pricing strategy

Depending on the type of your product or service, as well as your goals when creating your subscription model, you select a certain subscription pricing strategy. Apart from a regular, month-to-month billing, consider introducing some discounts for clients who subscribe for a longer period of time, or about specially priced packages of different subscribed products.

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And, of course, you can’t forget about creating subscription packages and levels. For starters, you can create just one package that jumpstarts your subscription-based revenue model. Then, as you gather more feedback from your customers and learn more about their preferences, you can create different packages.

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4. Improve the user experience to get more sign-ups

Have you ever quit in the middle of purchasing a product? If so, you must understand the importance of the UX in selling products. And that’s exactly why signing up for a subscription package should be easy, straightforward, and simple. You don’t want your customers to wander around your website having no idea what to do – you certainly don’t want confusion to be a barrier to conversion.

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5. Make the billing process simple and easy

With your well-designed packages, excellent onboarding, and strong customer service, you’re sure to have some renewals. Now you need to make sure that your billing system is set up to easily accept and process recurring payments.

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You should have a payment gateway right on your website or app so that your customers don’t have to navigate to a wide variety of links to renew their subscriptions.  

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Summary

Effectively used, a subscription business model can help your business grow.

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With a little creativity and the right strategy, the subscription business model leads to happier customers and greater retention rates for your business, allowing you to stand out from the competition and grow revenue.

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Will the subscription model keep going strong for another 10 years?  Or will a new business model, such as the so-called Creators Economy, take over? At this point, it’s hard to tell, but we’ll make sure to keep you informed!