A subscription model is what makes Netflix and Microsoft some of the most-profitable brands in the world. Your business might not be operating on the same scale as they do, but you stand a better chance of increasing your revenue if you use a membership subscription model.
In this article, you will find out some of the benefits of integrating subscription model in your business.
What is a Subscription Model?
It is a business model that thrives on recurring payments. Customers can subscribe to have access to the services and products your business offers either on a weekly or monthly basis. You can also introduce a yearly subscription model, with some discounts to drive the offer home.
Advantages of Subscription-Based Model for Businesses
As a business owner, one major pivoting to do this year is introduction a subscription service that allows customers to pay for services and products on a specific schedule.
Here are some of the benefits of using subscription model in your business:
1. Scalable Growth is Sustained
Besides providing innovative services and products, your business also wants to introduce a medium through which it can grow. A subscription model can make this work, thanks to these reasons:
- The flexibility of the model permits your business to focus mostly on the areas that bring the most revenues.
- Running a subscription-based model helps you to double-down and match the different pricing tiers, as per the clients’ needs.
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2. Running a Subscription Model Opens up more Market Opportunities
One of the major banes to starting a business is not having customers. Of what use is a business when it doesn’t have patronage?
Leveraging a subscription-based model proves to be a better option and a lowered barrier to entry because of the different pricing tiers. For example, targeted customers have a lot of options to choose from, while getting a considerable chunk of what your business has to offer.
This way, you will gain faster entry to the market, while understudying and exploring other avenues to solidify your business’ presence.
3. Inflow of Revenue is Assured
Not all businesses break even in the first couple of years – even the ones that run a subscription service.
Yet, you stand a better chance of making some income in the first couple of months and years if your business is structured in a way that income is predicted. What could be a better way to do this than using a subscription model.
Here is why it is important:
- This model already gives you the impression of steady, predictable revenue inflow.
- The major focus is on generating leads and nurturing the same to have more customers subscribing to your products or services.
- The consistency of the income is also assured, because customers or clients are charged at a specific timeframe – weekly, bi-weekly, monthly or yearly.
4. Customer Acquisition Costs are Lowered with Subscription Models
While some businesses think that marketing is costly, it can actually be affordable. The major reason why you spend a lot of money promoting your business is because of the reduced numbers of customers. If you had more customers coming back, the marketing costs will be less.
That is exactly what the subscription-based business model offers. Although you will spend a huge chunk of money getting these leads at the onset, you will spend less in the long-run, provided that you were able to retain a lot of them.
Thus, the more customers you retained, the less marketing you will do to keep them coming back to patronize your business.
5. Marketing with a Subscription Business is Laser-Focused
Your business doesn’t necessarily need to deploy all the marketing approaches before it can make sales. Only a few is enough – and with a subscription model, you don’t need to do much.
The laser-focus here is because of the following reasons:
- Your marketing efforts are not overly coercive, because you are making the customers to feel like a part of the business. Since they subscribed to the service or product, they will feel like a part of an “inner circle” of your business.
- With just email marketing automation and newsletters, your business can communicate and interact with the customers.
- Besides, the offers are not always limited to the main products and services. Launching a new product or service that compliments the main one? Promote them to your audience – and be sure of their continued patronage.
6. Subscription Model Increases a Business’ LTV
Running or integrating a subscription-based model into your business helps to make a positive impact on the Lifetime Value (LTV).
LTV has to do with the total amount spent by a customer within a specific time. Unlike one-time purchases that bring little revenue into the business, an extended period of patronage, via subscription proves to be more rewarding.
7. Reduce Customer Churns with Subscriptions
Whether it is online or offline, some customers are “turned off” by certain factors, one of which is the value (price) of the service or product. When they have a working budget and the value that they penned down is less than what your business offers, they tend to look elsewhere.
However, you stand a better chance of reducing customer churns – and instead, turning around to win these customers over and make them returning buyers.
Offering different pricing tiers via a subscription-based model gives these customers a “sense of belonging.” They can now patronize your business, based on the amount they have. With time, and provided your services or products are good, they can always “step-up” and upgrade to the higher subscription plans.
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Subscription Model vs One-Time Payment
A one-time payment implies paying for a product or service just once, but a subscription model requires the customers to renew their patronage often to keep enjoying these services or products.
Conclusion
Integrating a subscription-based model into your business is a good marketing strategy that pays in the long-run. Your brand will benefit from the higher Lifetime Value (LTV), increased patronage, accommodation of different categories of customers, better customer retention, and most importantly – an opportunity to build a strong customer base. Which of these benefits of incorporating subscription model to the marketing strategy of your business do you intend implementing immediately?
