Imagine living in a world of subscription model economy where no one owns what they have. You lease, rent, subscribe and borrow things, but you don’t own them. This might sound like an exaggeration of where things may go, but some of that is happening to us right now – subscription model.
Subscription based business model examples
Many people think of magazines and newspapers when they think of subscriptions – and they think that’s the be-all-and-end-all of the concept. These days though, just about any business can offer some kind of subscription model. This includes automobiles, razor blades, dog food, wind, dishwashing detergent, Xerox copiers, printer ink, and anything else you can imagine.
Why to use Subscription Models?
Subscription models offer a win-win situation for businesses and customers alike. For a business, a subscription model is more comfortable to run, scales better, and generates guaranteed recurring revenue. For customers, subscriptions are more convenient, and they can sometimes cost less.
I remember a time not that long ago I’d be spending $500 on a software package. After a year or so, the developer would come out with a new edition and want me to spend another $250 upgrading to the latest version. I liked how well the software already worked, so I never bothered upgrading. After three more upgrades, I finally felt it was time to upgrade. The company now allows me to subscribe to their software for $25/month. I’ve subscribed to them for several years now, and I enjoy having the luxury of the newest products without having to decide if I should buy it. It’s included in the subscription.
Business models are expanding beyond the automotive industry
Subscription models have now reached the automotive industry. No longer do you need to buy or lease cars. You can simply subscribe to a vehicle (or the company that produces it). Many brands allow their customers to subscribe to a car of their choosing. You may wonder what the difference between leasing a vehicle and subscribing to one is. Well, a lease would keep you locked in for an extended period. You are responsible for maintaining and insuring the vehicle too. With subscriptions, you aren’t stuck with the car for a long time. You don’t technically own it, so it’s not on you to insure it. Some brands also allow you to change models when you want. The Porsche Passport program, for example, lets you swap vehicles as much as you want. There’s no problem with driving a two-seat Porsche for a while and then switching to an SUV.
Conclusion of subscription models
When it comes to subscription models, I love what Dollar Shave Club is doing. For just four dollars a month, you get a package of four new razors each month. You’ve got a new razor blade every week. This is a bargain compared to the costs of buying a new razor from the store. You don’t even need to leave your house as the blades are delivered in the mail.
