September 16, 2020
Many businesses are thinking inside the box, offering subscription services to consumers for a monthly or annual fee. According to Mckinsey and Company, 15% of online shoppers have signed up for a subscription service to receive products repeatedly. From razors, makeup, television shows, and even beer, the subscription e-commerce market continues to expand, taking over a myriad of product and service categories.
There are several types of subscription services available to consumers. Here are a few of the most popular models used by today’s businesses.
The subscription service business model remains popular amongst software companies, providing different payment options based on necessary features, business size, and the number of digital devices. From SaaS, IaaS, and PaaS, these pay-as-you-go plans are flexible based on the organization’s individual needs, making it easy to adjust services on a month-to-month basis as company priorities evolve.
Subscription boxes are used by many retailers to provide consumers with a selection of products each month. From clothing, makeup, and even food, a majority of these subscription boxes are highly personalized to each customer’s tastes and preferences. With this, subscribers can enjoy the goods they know and love, while trying new products catered specifically to them.
Though not every e-commerce follows a subscription service model, businesses specializing in grocery and toiletry items have utilized this method of distribution to simplify shopping. In addition to e-commerce, traditional brick-and-mortar stores, such as Walmart and Target, have released subscription boxes ranging from beauty products to health and wellness items.
These subscriptions are a combination of services and e-commerce, giving consumers access to entertainment platforms for a monthly fee. Popular subscriptions such as Spotify, Netflix, Hulu, and Apple TV let subscribers choose from thousands of shows, movies, songs, and podcasts accessible from any device. Many of these services offer different types of plans, providing fewer advertisements or the ability to create multiple accounts for a higher monthly payment.
Advantages of a Subscription Business Model
By offering services or goods to subscribers at a set monthly price, businesses can better predict their monthly revenue. This helps companies make more informed decisions regarding their inventory, preventing issues with supplies. Though losing subscribers remains inevitable, automatic billing cycles eliminate revenue leaks, offering convenience and predictability to both customers and businesses.
2. Improves Customer Acquisition and Retention
Subscription services help attract customers by showcasing monthly prices, making goods appear more affordable and appealing. This also lowers the barrier for entry, allowing consumers to instantly access products or services, despite paying a greater amount over the course of their subscription. In addition to attracting subscribers, this business model promotes customer loyalty and retention as businesses have more opportunities to communicate directly with current subscribers, showing them options to upgrade their plans to improve their overall experience.
3. Marketing Opportunities
Subscription business models provide businesses with a myriad of marketing opportunities. The digital nature of these services allows companies to engage directly with customers using email, creating opportunities for upselling and cross-selling. Understanding consumer preferences helps businesses personalize campaigns to maintain and build customer loyalty.
Staying Ahead of the Competition
As a growing number of businesses offer subscription-based products and services, the market has become highly competitive. To stand out, businesses must find ways to differentiate themselves from competitors, offering exclusive features, brands, and discounts to their target audience. With this, personalization remains a key factor in attracting new customers, as potential subscribers search for the best options for their lifestyle and price range.