Are you looking to start a business to take out a subscription? here’s everything you need to know about the subscription business model, along with examples of successful businesses .
When it comes to starting a business, there are several business models you can use right from the start. The truth is, you are unlikely to be successful in your business if you don’t build your business on an existing business model and most importantly a business model that suits your business.
One quick tip is to find out what kind of business model the companies you’re building your business on are operating on. With this, you would eliminate the time and resources wasted on trial and error. You will simply settle for the right business model for your business with little to no stress.
One of the business models in which an investor expects to start a business in the United States of America should consider adopting a subscription business model. The beauty of the subscription model is that you have reason to expect some consistency. By using the number of subscriptions you have and the average growth rate of each of them over the past few months, you can get a reasonably accurate forecast of how much income you will receive monthly, quarterly, and annually. You will be able to plan and design with a certain degree of precision depending on the expected income.
There are some business niches that can only be successful if you use a subscription business model and want to know if your business fits that description, or if you just want to learn more about a subscription business model, you will find this article very interesting. and ingenious.
Subscription business model – everything you need to know
First of all, what is the business model of the subscription?
The subscription business model, as defined on Wikipedia, is a business model in which a customer has to regularly pay a constant price to access a product or service. This model was first introduced by book and periodical publishers in the 17th century and is now used by many businesses and websites.
Subscription business models are built around the idea of retailing a product or service to generate monthly or annual renewal revenue. They focus on customer retention versus customer acquisition. Basically, the subscription business model focuses on how to generate income so that a customer pays multiple payments for long term access to the desired service or product.
In fact, customers may find a subscription convenient if they think they buy the product or services regularly and can save money by purchasing the product or services. For the re-delivery of a product or service, the customer also saves time.
The business model of the subscription drives the customer and the supplier towards common goals, as both parties will benefit if the customer benefits from the subscription. The customer who receives the cost is more likely to renew the subscription and possibly at a higher rate.
A customer who doesn’t receive value most often ends up subscribing to your company’s products or services. A win-win situation should be the hallmark of a company that uses a subscription business model.
Benefits of a subscription business model
Businesses benefit from the subscription business model because they are guaranteed a predictable and consistent revenue stream from signatories for the duration of the signed agreement.
Not only does this greatly reduce uncertainty and business risk, but it often ensures that payments move forward (as is the case with magazines, concert tickets), allowing customers to become very attached to the business. ‘use of the service and therefore more likely to renew by signing an agreement. for the next period close to the expiration of the current agreement.
Subscription models often require or allow a business to collect significant amounts of information from a customer (for example, magazine mailing lists), which raises privacy concerns.
Pricing for subscriptions can make this easier. This means that you have to pay for big ticket items as they can often be paid for over a period of time which can make the product more affordable; on the other hand, most newspaper and magazine subscriptions are prepaid and this can actually interfere with subscriptions. some customers.
The fact that the subscription business model is a revenue model that charges a recurring fee to access a product or service means that the recurring nature of this business model is attractive to the business as a source of revenue and as a medium. to add value to the customer’s life.
Finally, the subscription business model makes it easy for the organization to increase revenue based on demand. For example, if demand suddenly drops from 100 units one week to 1000 the next, the business will adapt quickly and double its inventory to meet demand.
Some disadvantages of the subscription business model
While there are many advantages to the subscription business model, there are still obvious drawbacks.
In fact, this business model can be a disadvantage for a customer who plans to use the service periodically but not later. The obligation to pay the package could have been more expensive than a single purchase.
In some cases, subscription models increase the likelihood of vendor foreclosure, which can have critical business consequences. a customer if its activity depends on the availability of software.
For example, without an online connection to the license server to check the license status, from time to time the software in the subscription model usually stops working or reverts to the functionality of the freemium version, making it impossible ( continue) to use the software in remote locations or in particularly secure environments without Internet access after a vendor has ceased to support a version or software, or even ceased operations, leaving the customer incapable to renew their subscription and access their own data or software projects (in some companies it is important to have full access even to old files for decades).
We do not exclude that the customer may find repeated payments expensive. This conflicts with many one-off transactions where customers are forced to make large commitments due to high software prices.
Another downside is that a customer who is in jail or jail may be constantly being billed for a subscription. services that can provide them without funds when they are issued.
Finally, with the subscription business model, especially when the customer continues to receive packages that they do not need, the customer can simply abandon the products, such as magazines, this can lead to waste and environmental impacts. negative depending on the product.
The customer will incur higher production volumes, consume more energy and natural resources and, therefore, increase the disposal costs in terms of remuneration of the waste paper collection company or the general contractor. waste collection.
Revenue generation tools for the operator subscription business model:
There are two main ways that subscription business model operators generate revenue, and being able to fit that into your business goes a long way in determining how much you will generate monthly, quarterly, or annually.
- Subscription cost
Rather than selling products individually, a subscription is a way to earn money from customers on a monthly, annual, or seasonal basis to use or access a product or service. A subscription can be a pay-as-you-go subscription where you subscribe to a recurring product purchase, or a subscription to unlimited use of a service or set of services. Use may be personal and non-transferable, for a family or in certain circumstances for a group using the service at one time.
- Contribution
Membership fees are fees charged to members to access services and products exclusively for members. Businesses using this model include gyms, mail order and music clubs, cable TV, pay satellite TV providers TV channels, satellite radio, phone companies, mobile phone operators, providers of Internet services, software companies, websites (for example, blogging sites), business solution providers, financial service companies, health clubs, lawn mowing and snow removal services, pharmaceuticals and traditional newspapers, magazines and journals scientists.
7 ideas for niche subscription-based business models
There are many niche ideas that a budding entrepreneur who is considering using a subscription business model should consider, and some of them are
and. Gyms and park
If you are planning to open a gym or a park, one of the options that can guarantee you a stable income is to adopt a subscription business model; this will allow you to run your business with regular cash flow without falling into the trap. Just be sure to encourage members to subscribe annually, quarterly, or monthly. Gyms and parks in the United States and most countries offer their members on sale tickets as a monthly service fee.
b.Media
If you are looking to start a media business, especially a publishing business, you should consider working in a subscription business model. This is one of the perfect business ideas for this business niche. Customers are expected to periodically subscribe to your magazine, whether in print or online.
vs. Telecommunications
It’s normal for carriers to bill their customers based on data or airtime subscriptions. In the United States of America, the United Kingdom and most countries, telecommunications service providers charge customers a monthly fee for unlimited broadband bandwidth.
re. Software
The fastest and easiest way to generate income for your business if you want to get into software development is to adopt a subscription business model. The cloud service company charges the user a monthly fee to access the sales automation platform.
e. Present box
Although not required, if you are opening a gift shop, you can accept the subscription business model. For example, in the United States of America, a well-known cosmetics brand offers a monthly gift wrapping service that sends customers different product samples each month for a fee.
f. club or book club
If you are considering starting a club or book club, you have restrictions on how you can make money for the club and this is one of the most popular ways to generate income. Revenue must accept the subscription business model. Since your members regularly pay to register, they can access paid services.
g. Service plan
One of the obvious ways to generate income when running a maintenance company is to run the business with a subscription business model. The service company offers owners a maintenance plan for equipment such as air conditioners. Customers pay a monthly fee and receive free repairs in the event of failure.
h. Charity / non-profit organization
If you run a charity / non-profit organization, you can use the subscription business model to continue to generate revenue for the organization. For example, a charity or nonprofit is requesting donations in the form of a subscription, which may include perks such as a monthly magazine that highlights group work.
Example of 50 companies working with a subscription business model
Below are examples of companies from various industries currently using the subscription business model in the United States and around the world.
- Hello Fresh, Green Chef
- Amazon prime
- Sweatshirt by Kayla
- Car wash
- Kindle Direct
- Netflix
- Lynda.com
- $ 1 Shaving Club
- IPSY
- ATT and electricity
- Blue apron – use a clear call to action (CTA)
- Copyblogger – create a funnel to generate leads to content
- International Living – use your blog to showcase your membership
- Study Gateway – Start a Free Trial
- Lynda.com – Adding Apps to Your Subscription Business
- FabFitFun – Highlight the savings immediately
- Youpreneur – Understanding and Challenge in Your Target Market
- Freelance Den Writers – Build Your Confidence and Authority
- Birchbox – Explain how your membership site works
- eHarmony – Everyone loves a “guarantee”
- Dollar Shave Club – Use the power of the gift
- Pencil Kings – Use quizzes as a transformation tool
- DirecTV
- DISH
- Verizon Fios
- Comcast Corporation.
- Coxswain
- Time Warner Cable
- Charter spectrum
- Broadstripe
- Optimum
- Mediacom
- Charter communications
- T-Mobile USA.
- Sprint Corporation.
- CenturyLink.
- Seduce.
- Cosmopolitan.
- She.
- Charm.
- Time magazine
- In the style.
- Journal of the House of Ladies.
- Marie Claire.
- Shaving Club
- Birchbox
OrderGroove.
- Adobe and Autodesk
- Microsoft Inc.
- Google Office Tools
