Subscription based businesses are on the rise. There are numerous organisations that having previously used the pay once, use forever model, have now switched over to the subscription business model. This is because there are a lot of advantages of the system.
By taking these advantages, your business could see substantial and sustained growth as well as higher revenues and customer lifetime values. This all helps you to move your business on to the next level.
So what are the advantages of subscription based pricing?
1. It Can Attract More Customers
Charging customers $25 per month is going to be more attractive to them than charging $500 once. This is because the higher price is a barrier to entry for your products; the more expensive your product – the fewer customers that will be able to make a purchase.
Subscription payments lower the barrier and allow more potential customers to purchase your product. So while they may pay more over the long term, at least they will able to take advantage of the benefits you can provide them.
For you, it allows you to have greater monthly revenue and more customers to service.
2. It Offers A Reliable Income On A Regular Basis
When you are operating a pay once model you have to constantly draw in customers in order to earn revenue. This can be troublesome, one poor month and you can make a loss and it can be harder for you to make payments yourself which can incur additional charges.
With a subscription based business model, the customers are paying you a regular income. This allows you to determine how much you will get each month and ensures that you aren’t ordering more supplies than you need.
3. It Increases The Return On Customer Acquisition Costs
When you have a pay once model there is a set rate of return you receive on your customer acquisition cost. With the subscription model there is no standard return on the customer acquisition cost. That is because while the customer acquisition cost will remain similar (depending on marketing and conversion route), the lifetime customer value will increase depending on how long they are with your organisation.
The length of time they remain with your business can vary, but many subscription based businesses find that customers stay with them longer.
4. You Can Earn More Through Up And Cross Selling
Because you have continuous contact with your client base, you are building a strong bond of trust. This makes it easier to market additional and complimentary services as you have an audience that will be fairly receptive to them. Also, because they are only paying a small subscription fee, they have more disposal income and are better positioned to take you up on the offer.
5. Easy To Offer A Proof Of Concept
When you run a pay once business concept you are rarely able to offer a trial period or taster session. With subscription services it becomes easier to offer this and it can allow you to also offer free versions in the hope to lure the clients into subscribing to the full package.
This may require a lot more work, but it can be beneficial in a number of ways. Even if the customer doesn’t sign up straight away, they are likely to have provided you with their contact details which can be used for keeping in contact and selling to them your premium subscriptions services.
A subscription based model is one of the best available to business owners. It allows them to have highly successful companies that offer affordable but high quality products. One of the best aspects of a subscription business is its pricing, which presents advantages to both your business and your clients, such as those labelled above.