Outstanding features of the subscription business model
Posted: Mon Dec 09, 2024 10:33 am
Netflix, Spotify and PlayStation - these brands operate in different industries, but they have one thing in common - they are successful in operating on a subscription business model .
Subscriptions are great for selling a wide variety of products and services, from monthly beauty boxes to movie streaming. The subscription model isn’t limited to a few groups, and almost every company can use it.
The concept of ownership is slowly fading into the background, and more and more people are willing to pay for the privilege of using it.
A study by Zuora belgium phone numbers shows that users now have more subscriptions than ever before, and they don’t rule out more subscriptions in the future. About a third of respondents believe they will have more subscriptions in two years than they do now.
Image source
According to McKinsey, the subscription e-commerce market is expected to reach $473 billion by 2025. Subscription business models allow companies to leverage ongoing relationships with their customers.
Here are 5 key features of the subscription business model in e-commerce:
Lower prices – more customers
It’s usually easier to pay $60 a month for something than $6,000 right away. This factor greatly lowers the barrier to entry for new customers.
With a small amount of money, a person can get instant access to services, and this plays a significant role for him or her.
Projected Revenue
You have to attract new customers to your business with one sale after another, and even in one unsuccessful month, you could be in a deficit.
This means you’ll have to spend more money to attract them. A subscription business model avoids these risks: Users who subscribe are already regular customers.
So, monthly, recurring income helps you forecast sales, plan inventory, and understand how much you need to reinvest to grow your business. Having monthly cash advances means more cash flow for your startup.
Promotions are more profitable
Single payment business model has a customer acquisition cost (CAC) rate.
In the case of subscriptions, the CAC remains the same (depending on the marketing and conversion path), the profit of a customer over the life of his or her engagement (LTV) gradually increases until he or she cancels the subscription.
With a subscription business model, you have a greater chance of cross-selling. The more customers use your product, the more credible you become. This makes it easier to sell more products because they already know you represent value.
Subscriptions are great for selling a wide variety of products and services, from monthly beauty boxes to movie streaming. The subscription model isn’t limited to a few groups, and almost every company can use it.
The concept of ownership is slowly fading into the background, and more and more people are willing to pay for the privilege of using it.
A study by Zuora belgium phone numbers shows that users now have more subscriptions than ever before, and they don’t rule out more subscriptions in the future. About a third of respondents believe they will have more subscriptions in two years than they do now.
Image source
According to McKinsey, the subscription e-commerce market is expected to reach $473 billion by 2025. Subscription business models allow companies to leverage ongoing relationships with their customers.
Here are 5 key features of the subscription business model in e-commerce:
Lower prices – more customers
It’s usually easier to pay $60 a month for something than $6,000 right away. This factor greatly lowers the barrier to entry for new customers.
With a small amount of money, a person can get instant access to services, and this plays a significant role for him or her.
Projected Revenue
You have to attract new customers to your business with one sale after another, and even in one unsuccessful month, you could be in a deficit.
This means you’ll have to spend more money to attract them. A subscription business model avoids these risks: Users who subscribe are already regular customers.
So, monthly, recurring income helps you forecast sales, plan inventory, and understand how much you need to reinvest to grow your business. Having monthly cash advances means more cash flow for your startup.
Promotions are more profitable
Single payment business model has a customer acquisition cost (CAC) rate.
In the case of subscriptions, the CAC remains the same (depending on the marketing and conversion path), the profit of a customer over the life of his or her engagement (LTV) gradually increases until he or she cancels the subscription.
With a subscription business model, you have a greater chance of cross-selling. The more customers use your product, the more credible you become. This makes it easier to sell more products because they already know you represent value.