What’s a Subscription Model?

A subscription model is when a subscriber pays periodically in exchange for a product or service. Subscribers love these because subscription services have unparalleled convenience and value. Businesses love them because they save big and rake-in steady income.

How Do Subscription Businesses Make Money?

Subscription business models pull a steady and predictable stream of income in the form of recurring revenue. Since subscribers cost less once they’re subscribed, subscriptions make significantly more money through long-term relationships. They also cut out the middleman to serve customers directly, providing better prices, convenience, and creative freedom. Finally subscriptions make money by upselling with tiered pricing, volume pricing and freemium upgrades.

What’s Driving Subscription Models Forward?

It's the digitization of virtually everything. Millennials and GenZ are adopting these new digital solutions and programs rapidly. These age groups are more likely to subscribe for a service and try something new. Ownership is also less important to them. They care more about value and convenience.

The Downsides of Subscription Business Models

With all the pros, subscription businesses have their downsides. They are fiercely competitive, and breaking into the space and winning over subscribers will be capital and time intensive. Churn is inevitable. Businesses are forever trying to pull in new subscribers and decrease their churn rate. Initial sign-up avoidance occurs when people shy from giving their credit card to a random merchant. Check out this article for a deeper dive into the pros and cons.

6 Subscription Growth Strategies

1. Create a solid knowledge pipeline
   Content fosters trust and connects you with customers. 65% of buyers say that thought leadership changes their perception of a company and buying decision. Prioritize blogs, video, and forums to answer questions, and podcasts to showcase your expertise and engage new audiences is a good bet. And include case studies to show exactly how you work with customers. The aim is to build a blueprint of helpful interesting content to engage your customers.


2. Redefine your customers
   Take a step back and think about the markets you don’t target. Look at the customers that bring bad press and leave poor reviews. And the demographics that avoid your offering altogether. Start by understanding why people currently buy your product and what they expect from it. Then work out how the needs of these different markets align with your target market. You can then align product and service offerings to hit on the similarities.


3. Get to know your competition
   Learn what is being sold, to whom and for how much. An intimate understanding of competitor offerings tells you how to price better, and differentiate and recapture unhappy customers. It gives you a stronger understanding of how to offer a wow-subscription that’s never been seen before.


4. Automate, automate, automate
   Subscribers demand convenience. A hallmark of successful subscription businesses is automated billing and shipping. Let customers subscribe and unsubscribe with a single click. And implement a chatbot onto your website. Try walking yourself through the customer journey and note the bottlenecks or areas for improvement.


5. Get personal with declined payments
   Chargebacks are name of the game for subscription businesses. Instead of getting a refund from the Merchant, a customer calls their bank directly for a refund. This is commonly because of customer disputes, fraud, processing errors and authorization issues. These issues are hard to monitor and can bombard a business with compounding fees.


6. Develop a referral system
   Referral marketing generates 3-5x higher conversion than any other channel. People trust advice from friends and family more than a digital ad or billboard. Offering a referral program gives people incentive to spread the word about a product. It’s a good way to stoke word-of-mouth promotion.
   Click here for strategies on how to cross sell and upsell

These 5 models all have one thing in common

Subscription businesses provide an unparalleled opportunity for predictable profit from recurring revenue. Businesses love it because subscribers require little upfront cost once subscribed. And customers love it because subscriptions are far more convenient.


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