Have you noticed that more businesses are adopting a subscription model? If you listen to music on Spotify, watch shows on Netflix or use a meal-kit subscription plan like Good Food, you are most likely familiar with subscription plans. This article will explain the reasons why your business should implement a subscription model and highlight a few companies that have excelled in using this model.
Subscription plans are a business model where customers pay businesses a recurring monthly or yearly fee to use a certain service or product. With subscription plans, if businesses find loyal customers, they only need to persuade customers once, keep giving clients value and the revenue will continually come. Customer lifetime value increases as customers subscribe to a plan longer. Businesses will not have to constantly worry about finding new customers and instead, focus on keeping their current customers happy and satisfied. Many customers often forget what they are subscribed to. The beauty of subscription plans is that they are automatic and customers sometimes won’t even know or remember that they are subscribed to a plan.
As purchasing CDs became less popular, streaming services like Spotify and Apple music rose to popularity. Spotify is a well-known company that has successfully used subscription plans. Spotify is a music streaming service that charges $9.99 CAD a month to enjoy its premium features. Instead of buying a CD with only one album, Spotify users have access to millions of songs at their fingertips. Spotify was able to increase acquisition through freemium. Freemium is a business model that allows individuals to use basic features at no cost and requires users to pay for additional premium features. For example, when Spotify users upgrade to premium, they can listen to music with ads, skip songs an unlimited amount of times, and download songs to listen offline. Subscription-based model companies can offer a lower and more affordable monthly fee to their customers. They can make a profit off their content and the experience they offer their customers to enjoy entertainment.
Goodfood is a Canadian meal-kit subscription service that provides customers with, pre-measured ingredients, groceries, or ready-to-eat meals. Recipes are easy to follow and there is no food waste. Goodfood can take advantage of customers who are willing to pay more for low-carb meals. Meal-kit service companies capitalize on customers who are willing to pay for convenience. The process of cooking is made more enjoyable and fun when meal-kit companies send customers pre-measured ingredients and well-thought-out tasty recipes.
Subscription models also give businesses more customer insight. Businesses can collect data on customer preferences and actions. Relationships are also developed between businesses and customers which can provide useful data on how customers use products or enjoy services. One example is Dollar Shave Club. Dollar Shave Club is a subscription box that provides customers with shaving products, skincare, deodorant, body and hair products. Dollar Shave Club simplifies the process of purchasing personal hygiene products and can monetize convenience. Dollar Shave Club can use its data to personalize recommendations to its customers. This ultimately enhances a customer’s perceived value, fosters strong relationships and promotes the growth of the brand.
Subscription plans are not about selling a product but an experience. It adds value to products that are in the market. For example, instead of selling ink, a company can sell convenience. It becomes more than just the ink or a product. If a company sends you ink every time you are running low, it would save you lots of time. Businesses can now sell a service or a product with added value. When customers get used to the convenience of having their daily essentials shipped to their doorstep they will find it hard to unsubscribe. Customers who grow accustomed to all the premium features of an app will have a very difficult time switching back to the free plan.
Customers will stay loyal to a subscription plan if they believe that a product or service adds value to their lives. Subscription models provide businesses with a steady and predictable source of revenue. Instead of making a one-time sale, businesses could make monthly or yearly sales. There is no better time than now to implement a subscription model into your business.