Though some people tend to feel the model is a drawback and disadvantageous to business owners, in the long run, subscription business models do work and we’ve put together a list of tested and proven reasons as to why they do! Let’s get started!
1. Serves an Attractive Deal to Customers
One simple way to understand this is to ask yourself the questions, would you rather pay $500 in one shot or would you prefer paying it in installments of $25? This easily explains why subscription business models are definitely beneficial to not just the business owners but the customers as well.
For example, if you wish to send flowers every month or year to a loved one who lives far away, you can subscribe to The Bouqs Flower Company and order a lifetime supply of flowers at just one go, for a reasonable monthly or yearly installment!
Studies show that a majority of customers have a higher chance of purchasing a product if it fits within their budget than splurging huge amounts of money at one go, so subscription business models help conservative buyers purchase expensive products in a manner that’s easier on the wallet!
2. Predictable Revenue for Business Owners
Subscription models allow business owners to predict their average monthly income each month based on the current subscriptions. This knowledge of the recurring payments each month allows owners to order the right amount of supplies and stocks and prevents them from ordering in excess as they know just how much they need each month.
3. Reliable Income
Unlike other business models, subscription models offer a more consistent and reliable business model in terms of monthly income. This model prevents owners from stressing each month about the sales and income, as it provides owners with a steady stream of income that will also help contribute towards better growth initiatives. In the long run, these business models will allow owners to expand the business at a steady rate.
4. Customer Retention
Instead of going through the harrowing and time-consuming process of finding new clients each month to add to the customer base, subscription business models help motivate customers to remain as loyal customers due to the long-term subscription plans that in turn help them increase their Customer Lifetime Value (LTV).
All business models aim towards customer retention but subscription models have the ability to achieve this almost effortlessly when compared with other models and their different methods.
5. Provides a Marketing Base
Building a profitable marketing base can be hard for any business, but a subscription model comes with a built-in marketing base. This is because the more subscribers you have, the more email addresses you possess to market new offers and products to. This existing marketing base also has a higher chance of re-subscribing as they are already clients of the business.
6. Profitable to the Company and Customer
As mentioned earlier, this model isn’t just profitable to the company but is also beneficial to the clients in various ways, based on the predictability of revenue and the convenience of paying respectively. This automatically makes the business model a win-win!
Conclusion
Here’s a short recap of the reasons this business model is here for the win!
- Convenient for customers
- Predictability of revenue
- Steady income
- Loyal customer base
- A strong marketing base
We hope you found this article informative and enlightening.
Interesting related article: “What is Customer Loyalty?“