Ask yourself how many subscriptions you have in a month or how many subscription products or services you use daily. It’s more than it looks at first glance. There’s a subscription for everything today. The subscription model is rising, and you can turn almost anything into a subscription-based business model these days. But keep things simple!
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What is a Subscription-based Business Model?
A subscription business model sells a product or service in return for a recurring fee. The subscription started as a way for newspapers and magazines to rope in readers.
However, this business model has gradually evolved into a strategic approach for managing revenue and growth in a wide range of industries. So, why are you not using it?
Examples of Subscription Business Models
The subscription business model is BOOMING! Previously dominated by newspapers, magazines, gyms, utilities, and telecommunications firms, more products and services are being offered to more people through subscriptions than ever before. For example, mainstream news publications like The New York Times (NYT) or The Economist, and much more, have moved to create subscription-based business models when you have to subscribe to their news.
Advantages Of The Subscription Business Model
Does the subscription-based business model sound interesting to you? It’s a great way to start a business, generate profits, and get customers with less effort. Subscribing for a service or product works as a long-term relationship.
Imagine a company like Apple moving from selling hardware to adding subscription-based layers to their business – yes, a business model like that can be very profitable.
Listed below are some of the significant pros the subscription-based business model offers:
- Predictable revenues. For example, over 95% of Spotify customers remain loyal to and use their music streaming service every month. And that is definitely no outlier in this space. One significant advantage of the subscription business model is that customers tend to stick to service more often than not. That makes revenue recognition much handier and allows you to plan long-term.
- Deeper customer relationship. Customers are often deeply committed to their subscriptions and frequently use them. That allows the company to deepen its customer relationship and improves customer satisfaction. Collecting customer data and feedback with subscriptions becomes easier since loyal customers are more willing to share information. You will get to know your customers much better.
- Ability to raise prices. If your customers are very connected with your brand or product, it can be easier to raise prices. A good example is Netflix, which has a Premium Monthly price of 19.99$ in the US – back then, it was 7.99$.
- Simplicity. Consumers can profit from the simplicity of subscribing to a given product or service. Because there are no complicated set-up processes or hidden fees, it is easier for subscription businesses to acquire customers.
Why Subscriptions Work So Well
Everything we purchase, from transportation to entertainment to grocery shopping, will soon come with a monthly plan. The thing is that subscription based business models have become so popular for one main reason: CONVENIENCE.
how do subscription models make money?
Customers are charged repeatedly for a product or service in a subscription model. They can easily choose how often they want to receive each product or service and for how long since subscriptions must provide the option to renew or cancel at any time. A subscription is basically a contract between the provider and the customer. A deep relationship with customers and receiving constant feedback will create a complete ecosystem around their prime membership.
What is a SaaS subscription Business Model?
Another new big trend in the subscription economy is selling software at a monthly fee (software as a Service, or SaaS).
In the early days, companies like Adobe or Microsoft used to charge a one-time price to access software. Often, companies stopped improving and offering support for that software, resulting in unhappy customers. Nowadays, companies such as Grammarly have built their entire business around subscriptions.
How does it work?
SaaS companies let people use premium software and provide value to users by automating or optimizing processes. A subscription pricing structure for SaaS companies can be very profitable because it allows them:
- Offer a lower upfront price.
- Receive consistent income.
- Scale their business.
- Present a low-commitment product. (For example, if a customer outgrew the solution, they can easily cancel their subscription.
That is also how Tridens subscription billing software works. Different plans for their services are suitable for different businesses in size, budget, and needs.
How to start a subscription business with Tridens
Subscription based business models are changing the business landscape for both customers and business owners. Customers need to know that they are getting value, and the merchant needs to be able to price things effectively to show off this value. If a business handles things correctly, they have less churn and more satisfied customers.
The subscription based billing model has proven to adapt to changing market dynamics successfully. Although, executing it seamlessly from acquisition to accounting while scaling is not as easy as flipping a switch.
But it could be with Tridens Monetization, a proven Innovative Cloud Billing Software that reduces time-to-market with easy-to-use, real-time consolidated billing (convergent charging) and cloud monetization.
