Do you focus on getting your prospects and customers to pay a recurring fee at regular intervals, such as monthly, quarterly, or annually, for access to a product or service? If so, you’re engaging in Subscription Selling, also known as Subscription Sales. In this approach, you’re a Subscription Seller, and your company operates on a Subscription Business Model.
The subscription selling model is particularly popular in industries such as software, media, clubs, utilities, telecoms, and consumer goods.
The primary appeal of subscription selling lies in its ability to create a predictable revenue stream for businesses while providing continuous value to customers.
HubSpot has the following definition of a ‘Subscription Business Model’:
“Do you focus on getting your prospects and customers to pay a recurring fee at regular intervals, such as monthly, quarterly, or annually, for access to a product or service? If so, you’re engaging in Subscription Selling, also known as Subscription Sales.”
“In this approach, you’re a Subscription Seller, and your company operates on a Subscription Business Model.”
How Subscription Selling Works – Customer’s Viewpoint
When you choose a subscription service, you’re essentially entering into an ongoing relationship with the provider. Instead of making a one-time purchase, you agree to pay a fee at set intervals in exchange for continuous access to a product or service.
This could be anything from streaming services like Netflix, to subscription boxes for food or clothing, membership of your local fitness club, a premium news website like The New York Times or The Economist, or software services like Adobe Creative Cloud.
One of the key features of subscription selling is the automatic renewal process. Once you sign up, your subscription usually renews automatically at the end of each billing cycle, unless you decide to cancel.
This setup ensures that you maintain uninterrupted access to the service or product, and it helps businesses maintain a steady flow of income.
Image created by Market Business News.
Benefits of Subscription Selling for You as a Businesses
If your company operates on a subscription business model, it can enjoy many benefits.
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Predictability
Subscriptions provide you with a predictable revenue stream. Knowing that a certain number of customers will be renewing their subscriptions each month allows you to plan and allocate resources more effectively.
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Customer and Brand Loyalty
It fosters customer loyalty and brand loyalty. When somebody subscribes to your service, they are more likely to stay over the long-term, especially if your offering meets their needs.
This long-term relationship can lead to increased customer retention and a higher lifetime value per customer.
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Personalization
Subscription selling allows you to gather valuable data on customer behavior. By analyzing how they interact with your service, you can tailor your offerings to better suit their needs, leading to a more personalized experience.
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Cost-Effective Upselling
When you have a new product or service, you can approach your existing customer base, who are already familiar with your brand. Studies have shown that it is much cheaper to sell to your existing customers than to try and find new ones. This can make upselling and cross-selling efforts more effective and less costly.
Benefits for You as a Customer
As a customer, subscription selling offers convenience and often, cost savings.
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Your Budget
Instead of making large, upfront purchases, you can spread the cost over time. You also have the flexibility to cancel if the service no longer meets your needs.
Many subscription services also offer tiered pricing, so you can choose a plan that best fits your budget and usage.
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Updates & New Features
In addition, subscription services often come with updates or new features that are automatically included in your plan. This means you’re always getting the latest version of a product without having to make additional purchases.
Similar Selling Methods
In the world of sales, there are dozens of different methods. Here are the one most similar to subscription selling:
This is directly aligned with subscription selling as it focuses on generating consistent, recurring revenue, much like subscriptions do.
While not exactly the same, upselling often occurs within a subscription model where businesses encourage customers to move to a higher-tier subscription or add additional services.
Similar to upselling, cross-selling involves selling additional products or services to existing customers, which can be a natural extension of a subscription model.
This method focuses on selling a comprehensive solution to a customer’s problem, which often takes the form of a subscription service that provides ongoing solutions over time.
Subscription selling often relies on building long-term relationships with customers, much like relationship selling, which focuses on developing strong, ongoing connections with clients.
This approach focuses on putting the client’s needs first, which aligns with the customer-focused nature of subscription models where the goal is to retain customers by continuously meeting their needs.
Brief History of Subscription Business Models
Subscription selling dates back to the 17th century, initially used by newspapers and magazines to secure recurring revenue. La Gazette, a French newspaper which was founded in 1631 by Théophraste Renaudot, is the first newspaper subscription model that we know of.
Subscription selling became more and widespread in the 20th century. The business model rapidly expanded beyond print in the late 20th century.
Today, more that one billion people across the globe are subscription customers. Below, you can see details of 13 companies and their subscriber numbers:
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Spotify
Subscribers: Over 500 million users (including both free and premium accounts)
Location: Sweden
Offering: Music streaming service
Founded: 2006
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Netflix
Subscribers: Over 230 million globally
Location: USA
Offering: Video streaming service
Founded: 1997
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Amazon Prime
Subscribers: Over 200 million globally
Location: USA
Offering: Free shipping, streaming (Prime Video), music, and other services
Founded: 2005
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Tencent Video
Subscribers: Over 120 million paid subscribers
Location: China
Offering: Video streaming service
Founded: 2011
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iQIYI
Subscribers: Over 100 million paid subscribers
Location: China
Offering: Video streaming service
Founded: 2010
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Youku
Subscribers: Approximately 90 million
Location: China
Offering: Video streaming service
Founded: 2006
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Disney+
Subscribers: 153.8 million globally
Location: USA
Offering: Video streaming service with Disney, Marvel, Pixar, Star Wars content
Founded: 2019
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Apple Music
Subscribers: 88 million globally
Location: USA
Offering: Music streaming service
Founded: 2015
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HBO Max
Subscribers: Over 96 million globally
Location: USA
Offering: Video streaming service with HBO content
Founded: 2020
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Hulu
Subscribers: 51.1 million in the USA
Location: USA
Offering: Video streaming service
Founded: 2007
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Microsoft 365
Subscribers: Over 65 million (commercial subscribers)
Location: USA
Offering: Software suite with Office apps, cloud services
Founded: 2001 (as Office 365, rebranded in 2020)
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YouTube Premium
Subscribers: Over 80 million globally
Location: USA
Offering: Ad-free video streaming, music streaming
Founded: 2014
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PlayStation Plus
Subscribers: Over 47 million globally
Location: Japan
Offering: Online gaming services, free monthly games
Founded: 2010
Final Thoughts
Subscription selling is a win-win for both businesses and customers. For you as a business, it offers a stable revenue stream and fosters long-term customer relationships.
For the customer, it provides convenience, flexibility, and often, cost savings. As this model continues to grow in popularity, it’s likely that more products and services will become available through subscriptions, giving consumers even more options to choose from.