Disclosing the Facts of Subscription Business Model

In this ever-changing world, the latest trend for soaring businesses is the Subscription business model. We go for Netflix instead of regular TV, for Dollar Shave Club instead of a regular shop, for Blue Apron instead of cookbook recipes. These changes go quite unnoticed but make a huge difference in the market trends and business strategies of companies.

The upsurge of subscription companies is partially because of the changed psychology of the customers. The subscription-based companies provide various options depending upon the features offered on different plans which gives the customers an option to choose a plan according to their need. Subscription boxes have also become very popular these days, Birchbox for instance.

Entrepreneurs are setting their foot in the business industry with innovative subscription services which have become one of the fastest growing segments in business today. If you want to start a business in the subscription services, take a look at the important information to learn all about the subscription business model.You may like to read – How does PayPal Work?

A subscription business model is the one in which the customers pay a fixed amount of money on fixed time intervals to get access to the product or service provided by the company. In a basic subscription model, the company provides a product or a service on a monthly or yearly basis. This gives a recurring revenue to the company and pocket-friendly offers to the customers.

More and more startups are attracted towards this model because unlike other retail Business Model, in a subscription business model, you have a record of subscribers and hence no inventory issues are raised. This gives them assured and a predictable account of a constant revenue stream. The renewal of a subscription is periodic and automated often. Companies or organisations providing memberships also come under this category.

The subscription business model works in different patterns depending upon the product or service provided by the company. Basically, a company starts by establishing a fixed price point for the product provided by them. The company also needs to decide how often and for how long the company wants to provide the service or the product.

If you’re planning to provide in-house product, it is easier to decide the price point, but you also need to think about how much the customers will be willing to pay you on a recurring basis. If you’re starting out as a contractor, you need to guarantee a steady product line and availability. Also make sure your fixed price point doesn’t undercut your profit margin, as a customer once subscribes to your service, you can’t raise prices for that fixed interval.

From the customer’s perspective, this model is very upfront. Once the customer has signed up and paid for the product, the customer will receive the predetermined product on regular basis. If the company is providing a service, the customer will get access to use the service.

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This way the subscription-based companies are focused more on customer retention rather than customer acquisition. These companies tend to have the upper hand as they have more opportunities to interact with customers and have access to record customer behaviour towards their products or service. They can use this to check when the customers tend to cancel the subscription and use this information to avoid pitfalls. Hence they get more chances to cross-sell and upsell.

How does Subscription Business Model Work?

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