The subscription business model has been around for longer than most people might realize. Remember the old days when people had milk delivered to their door? That could be called a subscription service or subscription business model . You subscribed to have the milkman deliver milk directly to your door in return for payment. You’d expect a certain level of service, and his arrival would be predictable but relied upon. You’d want fresh and delicious milk, and you’d pay for that. What about that isn’t a subscription?
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Subscription Business Models Today
These days many businesses adopt a subscription business model, but they have new and inventive ways of establishing them. While many people still subscribe to the newspaper, for example, they might have it delivered to their computer instead of to their doorstep. That’s only one example of how subscriptions have remained, even if they are a bit different these days.
Before Amazon got around to launching the Amazon Prime subscription service, the mail arrived when it was good and ready to. These days, you’d expect to receive your packages within a day. You know when your orders are going to arrive because Alexa lets you know. This has become the norm for most people now.
If Amazon can launch a subscription model, then nothing is preventing you from doing it too. You can integrate subscription plans and sales into your business model and transform the user experience. The continually-changing nature of technology – and the speed at which advancements are developed – have changed how business models provide ways for customers to interact with a business and consumer services.
Are Subscription Services Back in Vogue?
One could argue that the milkman has made a return, of sorts. Only now he’s arrived in the form of metadata and algorithms. The evolution of how customers consume services has been fast. Customers have demanded nothing less than constant innovation. They need something new. They know that they can’t live without what comes next, even though they might not know what it is.
That’s the problem; they don’t know what they want until they understand. That’s where you come in. You analyze their needs for them and provide them with a service that meets those needs.
How Subscription Business Model Can Transform A Business
I work as the director of cloud sales and operations for a company that helps to grow subscription based-businesses. In my experience, I’ve come to believe that the days of one-off implementations and standard transactional software sales have come and gone. Gartner estimates that by 2022, over 85% of software providers will have migrated to a subscription-based business model”. That’s just the one industry too. Industries such as utilities, telecommunications, and media companies have had these subscription models for years.
These recurring revenue business models are built around a systemic sales schedule where customers receive products and/or services at regular intervals. In return, they provide you with monthly recurring income. Standardizing business offerings as a regular service makes it much easier to package them and sell them to customers. That can lead to your bottom line getting a nice recurring revenue stream. Your customers can benefit from having a predictable spend while suppliers benefit from having predictable, recurring revenue. The whole thing is a win-win situation that makes budgeting easier for both supplier and customer.
What “Products “ to Target With Subscriptions
What’s so good about using subscriptions for software is that just about anything could be turned into a subscription service, from hardware to monitoring to custom IP. When considering how to transform a business into a subscription business model best, you should make sure to package the services and solutions that you specialize in.
The subscription you offer is only as good as the knowledge that you put into making them. If you run a customer relationship management (CRM) service, then you shouldn’t cause a subscription-based around enterprise resource planning (ERP), for example. In general, the more verticalized and niche the market that you target, the better the revenue stream that comes out of it.
How to Clarify and Define Opportunities
Once you’ve picked a product you should ask yourself some questions to make the ultimate decision and put together the subscription business model;
- What does the market tell you?
- What are customer trends telling you?
- What segments of the audience could you reach, and what sectors could you dominate?
- What verticals – if any – are you strong in?
- What is your 12-24 month plan for those business channels?
- Who is the customer behind those segments, and how will you reach them today?
- What is your sweet spot in the market? What part of the market could you monetize the most with the least amount of effort?
- What is the competition doing in these segments and verticals?
- Run the numbers and ask how much you could take from the total addressable market
- How could you ensure alignment with the core portfolio so you can add value?
Don’t forget that you can turn anything into a subscription business model. Keep things simple. Package what you know and target your audience and market.
You can plan while transforming your revenue model by considering these points;
- When it comes to software, not everyone uses every benefit or feature available. That may make them hesitate about purchasing a subscription. You should anticipate this and work around it. Offer a “complete” subscription, and offer smaller “mini” bundles. Customize the offer and give customers a feeling of value-added where they can purchase as much (or as little) as they need.
- Subscriptions still need some work from your end. You should include customer user metrics in the sales plan and continually follow up with subscriptions. Track how people use your services and give customers the speed and efficiency they expect. You can track subscription information and analyze how often people interact with you.
- Take the long road when it comes to subscription sales. When you first implement subscriptions, you could be losing money, but over time more people will subscribe, and earnings will increase. Don’t give up because you aren’t making a lot of money right away.
When you consider implementing a recurring revenue stream like this, you should take a good look at what you are doing, how you do it, and why you do it. Single service software sales may always be a part of the business practice, but you should keep in mind you’ve got the chance to package customers’ needs and deliver to them every single day.