3 Reasons to Consider the Subscription Business Model

3 Reasons to Consider the Subscription Business Model

In the last few years, quite a number of companies have either incorporated subscription billing into their business plan or switched completely to a subscription model. From content providers in the entertainment industry to heavyweights in the SaaS sector, it seems that businesses that follow the subscription business model will soon become the norm. After all, this model helps brands craft better customer experiences, resulting in higher engagement and tremendous business growth.

If you’re still undecided about making the shift, here are a few more reasons to consider being part of the subscription economy.

1. Frictionless Transactions = Customer Satisfaction

As a customer, there is no worse experience than being forced to fill out numerous forms just to keep your subscription active. As a basic marketing rule, the more hoops placed between a customer and a desired product, the more likely they’ll cancel their purchase. With the subscription billing model, customers can simply input their debit or credit card details and automatically get billed each month. The less hassle a subscriber experiences just to maintain their subscription, the more satisfied they will be with your brand overall.

However, because the subscription billing process is often automated, there are times when customers forget to update their payment information after their debit or credit card expires. This could lead to involuntary customer churn, wherein subscriptions are involuntarily cancelled (thus the name), often without the users being aware of it. Fortunately, all of this can be prevented by using a subscription management software that automatically resolves failed payment transactions.

2. Scalability for Each Customer’s Individual Needs

When a customer can no longer afford your services, it’s best to do everything you can to retain them. This is because the cost of acquiring a customer is generally more expensive upfront. In order to profit from—or even break even—on customer acquisition, you need to keep them subscribed for a generally long amount of time. If they cancel earlier than planned, then it can translate to a huge loss for your business.

A subscription business model allows you to provide differently priced plans that can fit different customer needs. If you’re trying to attract new customers, you can provide free trials or discounted offers, and then entice them to upgrade to a more substantial plan down the line. On the other hand, if a subscriber’s financial situation changes, you can encourage them to downgrade to a more affordable plan, with the option of easily switching back to their regular plan once their budget has stabilized.

The more flexibility you provide, the more likely a subscriber will happily stay with your brand for the long term.

Comparing subscription-based plans

3. Predictable Spending, Predictable Revenue

Users greatly appreciate transparency when it comes to pricing, and this is even more important if you’re working with a subscription model. Forcing unexpected and fluctuating charges onto a loyal customer is a surefire way of driving them away from your company forever.

Because subscriptions are usually offered on a flat-fee basis, customers know exactly how much they have to pay on a regular basis. At the same time, businesses also benefit by having more predictable revenue, which allows for much more effective investment and planning. Additionally, having a steady cash flow can also result in a higher company valuation.

Conclusion

Regardless of the industry you operate in, it’s hard to ignore the benefits that a subscription business model can offer. Try implementing this strategy into your company, and you may be surprised with the results. Not only will you be able to retain more customers, increase your profits, and secure a regular income stream, but you’ll also be able to build long-lasting relationships with customers who will become your strongest brand advocates.

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