A subscription model is very useful when it comes to running a business. It provides benefits for both your brand and your customers while being very easy to set up and manage. Yet there are a number of businesses out there who are perfect for this model but have not converted. What are the reasons for this?
They Think Subscription Models Aren’t Applicable To their Industry?
There are many products and services which suit a subscription model, yet businesses are unaware of the opportunity. This often forces them to stick with “pay once, use forever” models. However, as can be seen by businesses like Dollar Shave Club, every industry can use a subscription model.
Businesses who want to convert need to sit down and think carefully about their product. If it is a simple product which is delivered with regularity there is the opportunity to create a subscription service. They just need to consider the frequency of delivery and how much they are going to charge your customers.
They Believe Customers Aren’t Going To Like A Subscription Service!
There are many times when businesses might be convinced that their customers aren’t going to like a subscription service. This is often the case when it comes down to certain types of software like operating systems or when the product is required to operate another device / service.
For instance, an operating system on a Mac or PC is necessary to run the device. Consumers might feel they are being cheated if the product they buy is not fully operational without further purchases. This move has been seen with the recent changes Adobe has implemented where users now have to pay a subscription.
However, this sentiment is normally gained because an old – ‘buy once, use forever’ model was implemented. There are some flaws with this model with software and similar products. For instance, many software providers only allow the installation on a set number of machines, normally about three. This means that if the user has more devices or replaces devices on a regular basis, they have to buy the product several times over or buy more licenses – an expensive endeavour.
If the business moved to a subscription basis, the user can be offered a more cost effective method of having access to the software while allowing the product on as many devices as they own. Businesses just need to explain this benefit.
In addition, the cost of buying a product outright can be expensive for the user. Having a subscription gives customers a more cost effective method of gaining access and allows more of the target audience access to the product.
Business Want The Higher Purchase Amount From A One Off Payment!
While businesses may earn more money per transaction when it comes to a ‘buy once, use forever’ model, evidence has shown the lifetime value of the customer is significantly less. Research demonstrates users tend to not unsubscribe from subscription services if the regular payment is low enough and there is good service being provided. Therefore, customers can be with the business for a significant amount of time which will provide more revenue than if the customer was made to buy the product outright. This allows the company to focus less on new customer acquisition to maintain a healthy cash flow and more on customer service, which is less costly.
A subscription based business is one of the most profitable models. The reasons why businesses think the model is not suitable are usually misconceptions. For most industries there are significant opportunities for a subscription business model.