Subscription-Based Business Model is a Win-Win

Nothing can be more heartwarming for an entrepreneur or a business owner than to be assured that the products being churned out from the mills are virtually already sold and nothing can as well be more alluring to a consumer than to have more, for less. This beautiful scenario is what the subscription-based business model proffers.

A research by Credit Angels has it that in 2012, downloads made up 70 percent of global music revenues with streaming only at 18 percent. In comparison, by the end of 2017, however, downloads slumped to 23 percent and streaming took a quantum leap to 73 percent.

Forbes also reports that the subscription e-commerce market has grown by more than 100 percent a year the past five years, with the largest retailers generating more than $2.6 billion sales in 2016, up from $57.0 million in 2011.

Why all the hype about subscription-based business models?

Subscription models lock in customers for a period of time depending on the plan, promising a recurring stream of revenue rather than the charge by service or product customers who can switch to other providers without any form of notice and often to the heartache of the provider. Any entrepreneur or business owner feels the stress of the constant brainstorming associated with production, the competitive nature of the global market, and will, therefore,  be more than relieved for any assurance that the products or services will be an absolute sell-out.

Let’s take a plunge into how these subscription models are a win-win situation for businesses and customers alike.

Convenience for businesses and customers

A subscription-based business model is a form of regimented transaction. By subscribing to a particular plan by the customer, there is an agreement reached between both of them on the schedule of payment and supply of products or services which can be daily, weekly, or monthly to the convenience of both parties. This takes off the burden of constantly tinkering with the budget in order to stay afloat by the company and reviewing purchasing decisions by the customer.

The model will also give the business an overview of the accruable monthly revenue having the data of subscribers and the volume of products or services that must be delivered at any point in time. This information will also ensure that the company puts up a comprehensive management plan of resources thereby avoiding waste and unnecessary overhead. The attendant advantage to the customer here is that the wastage, which would have come in the way of a higher purchasing price for the product or service is done away with.

The customer is also saved the hurdles of jumping from one shop to another all in search of products, also saving time and energy since the product will be delivered as and at when due and most probably at the doorstep of the customer like milk and newspaper delivery. The business is also free from the unwarranted and constant push for outlets to sell the product. There is this other added convenience of bundling that is buying all in the price of one.

Lasting relationship

A solid bond of relationship based on an overwhelmingly amazing degree of trust is built between a subscription-based business and the customer especially with the report that the failure rate of all U.S. companies after five years was over 50 percent, and over 70 percent after 10 years.

The relationship helps to build both the company and customer loyalty and broadens a business’ client base. The customer may even be consulted for inputs into the product based on the strength of the relationship.

The trust ensures the retention of customers, saving the company the task of tracking down new customers everytime a sale is made. The company will experience a surge in goodwill and earns a lot of words of mouth promotion.

The customer is guaranteed quality product all the year round for the fact that the company will never want to hurt the feelings or breach the trust that has been forged between the two parties. Quick and in-depth resolution of complaints from the customer is also assured.

Ability to scale

If for any reason the customer needs to change the plan, a subscription-based model offers the room to scale work up or down, without worrying about contracts and a whole load of paper works. For instance, if a customer has the need to invest in a particular project such as spending more on the education of the children, the subscription can be decreased for a few months. Work will still continue but at a slower pace.

If on the other hand, there is a sudden upsurge in the business of a customer and there is the need to reach out to more people, there is always the opportunity to raise up the volume of the plan without so much stress. For subscription-based business models, nothing is cast on stone, there is absolute flexibility for both the subscriber and the provider.

Photo Credit: Flickr via Compfight cc

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About John Ejiofor

John Ejiofor is a curious life-researcher, whose quest to finding answers to life's pertinent questions has led to founding Nature Torch. This blog aims to debate and explore many questions about our earth -- including those a lot of people are uncomfortable with asking. He has been published on some of the internet's most respected websites, which you can find online.
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