By Nikki Cali, Founder of MemberApp
Were you subscribed to any magazines or prints as a teenager or young adult? I’m from the generation where Teen mags, Home mags, land in my letterbox monthly… it was like a gift that kept coming 12 times a year, and boy it was great. Now, though subscription has a much broader definition, especially with the online world, such as ever-popular streaming services of Netflix and Spotify, etc
The printing press first introduced this model in the fifteenth century. Everyone who wanted access to a magazine or newspaper at a certain period has to pay for its access. These payments were limited to a certain kind of product and service. Still, with the rise of technology, they increasingly gained momentum over the years. Fast forward to our digital age; subscription businesses have become the order of the day as many companies are transiting from the traditional way of doing business, where revenues are made from a customer’s one-time purchase. With this model, these firms make their earnings regularly in return to provide consistent access to a product or service delivery.
Thanks to companies like Costco, who played a major role in changing the game, the subscription model has gained massive popularity among customers and businesses.
How did Costo come about this model? You may ask
They had to limit customer access to their stores and voila, customers had to pay their way into the store (annual fee). By paying this fee, these customers could properly buy goods that Costo sells, which was cheaper than what other competitors sell. The cheap purchase was the catch, but there was always a price to be paid to access such a catch. To Costo, this limited access they created gave them an increase in demand for value and a sense of status to entry (VIP, Special access, etc.).
Over the years, the subscription model has become a booming field that’s not going away anytime soon. Statistics have shown that the subscription market was steadily rising; there was a tremendous increase in sales between 2011 and 2016 from $57 million to $2.6 billion in 2016.
A 2018 consumer Study by Mequoda Magazine showed a 25% increase (US$2.3 billion) in the number of subscribers as against its US$1.2 billion in 2015. This is expected to triple at the end of the 2021 business year due to the growing interest in digital magazines.
Based on the 2019 statistics by Variety.com, it is estimated that 70% of U.S households won’t have a traditional T.V subscription (i.e., cable television and satellites). This increasing trend also increases the subscription of several streaming music services among teens and young adults. This increasing trend can also be seen in the finance industry. For instance, as of 2019, a CFO report showed that the subscription-based model is rising as over 23% of top senior officers are incorporating this model into their strategic planning. Over 17% of these executives are expected to launch a new business with the model.
However, during the pandemic, the market saw a jaw-dropping rise in demand for these services amid the huge demand for digital services. This was because the pandemic forced everyone to adjust their work style and life habits. With the lifestyle change came an increasing consumer and business demand, which was capitalized on to yield massive revenues. Companies such as Netflix, Zoom, and Microsoft have benefited greatly from this model. The aftermath effect of the pandemic has increased these demands since the benefits of such are pretty numerous and get updated with more personalized features.
The Subscription business model is here to stay. As a startup, it is of utmost importance that you pivot to this model because it is the most reliable way to gain customers and retain them by continuously adding value. With this model, you understand how pricing helps position you among various competitors and guarantees your long-term success. The longer your customers prefer and use your product, the more valuable your customers become, ensuring your growth amid the competition. Besides the fact that most companies (including startups) are shifting towards this model, it is also popular for clients. All players in the market want this model because it is a go-to for everyone; more like a win-win for both clients and businesses.
One of such amazing offerings is its appeal of convenience on both client and business levels. To clients, the model ensures that they have less than nothing to worry about for their purchases. These clients would be more likely to receive regular reminders on product offers and purchases with the model. This reminder will enable them to remember to fulfill a need they will not have remembered. The model offers businesses the ability to sell these services with fewer things to worry about. It is cost-effective since there would be no extra cost on marketing or sales. It guarantees income from a host of loyal customers. Also, it is a tool that business owners can turn to for effective setup, running, and operation of the business. For instance, MemberApp (https://memberapp.com.au/) is a software that supports and enables the business to grow by providing other businesses with multiple ways to deliver their content and keep their members engaged. Most startups might initially find it difficult to access or know how to access ways to grow online via subscriptions or memberships. Still, MemberApp ensures a functional setup that can enable these startups to grow by delivering content to their subscribers as an alternative or new way to gain income.
Just like Tien Tzuoopen in the new window, stated that the Subscription-Based Model is the future. If businesses aren’t shifting to this model now, there would be a high chance that such business owners will soon be out of business. You may not start with creating a model similar to Netflix or other big firms. However, you can start simply by registering an email so that customers can be prompted when you have a new offering while providing a customer with their product readily as prescribed.
As a business owner, the subscription model enables you to attract a global market that will potentially grow your business and enable you to improve your products and services over time. Unlike a “pay once” model, you’re more likely to earn revenue faster and easier since most subscribers are automatically converted as your customers. You can also predict your future revenue since recurring payments are often decided when the initial sale was made. Regardless of economic turbulence and financial fluctuations, the recurring revenue from the subscription model will ensure the viability of your business.
Since the subscription model appeals more to the convenience and personalization of the customer, you’ll have less trouble building better customer relationships and gaining loyalty. This is because the model is flexible to accommodate additional value. A customer automatically becomes loyal to you if they want and pays a higher/customized plan or an upgrade. Since they can buy from you regularly, there would be lesser or no need to put aside money for marketing to retain them or gain their loyalty.
As mentioned earlier, shifting to the subscription model will enable you to earn more by providing an additional revenue stream with the SAME customers. Since you’ll constantly be in touch with customers, having their trust and loyalty, you can create additional customized services which should be affordable. This wouldn’t change the customer’s purchasing pattern; since you already have a prior relationship with them (through the subscription fee) and your product has, over time, proven its worth to them, they’d end up being receptive to this new personalized addition. With no acquisition cost, the subscription model enables you to get additional revenue from the same customer.
Diverse businesses have grown from using this model. Apart from the huge profits it yields, it also enhances collaborative opportunities, i.e., with this model, businesses do not find it hard, supporting other businesses. Once created, this model enhances business partnerships across a variety of different industries. With the massive benefits, more and more firms are likely to enter into a great partnership with Subscription-service companies to meet the ever-increasing demands as seamlessly and efficiently as possible.
Due to its flourishing opportunities, it wouldn’t be difficult to get investors to look into your portfolio as a business owner. The subscription model guarantees predictable revenue, encourages mouth-watering partnerships, and enhances customer acquisition cost return from marketing to sales and finance. Unlike traditional companies that would not make a viable investor hesitant to invest, the subscription model gives off some level of certainty that the company already has a captive market and is likely to expand and flourish over time.
Therefore, all you have to do as a business owner is to have a proven product and services with the willingness to transition to a subscription model. For a business owner or entrepreneur, this is the real deal of the modern business world.
Aside from having a subscription model, keeping your subscribers engaged and interested in your business is also vital. Alongside the loyalty and sales rate, such engagements will produce, your brand would be found more valuable among its numerous competitors. These engagements will provide a unique and seamless customer experience throughout their purchase journey. These engagements will strengthen their emotional connection to your brand, from interacting with them to sharing something of value via social media. Organizing an offline event like an exclusive anniversary party might seem old-fashioned, but it is a great way to directly mingle and engage your subscribers. Activities like a product tour, collaborating on content production, asking for feedback on certain services, holding a contest, announcing a “subscriber” of the month via your pages, etc. These are great ways to capture the heart and minds of these people, making them feel like a part of your team.
You may wonder if ALL products/services can be shifted to the subscription-based model. The answer is YES; every business can be turned into the subscription model. Look beyond the product and provide value; the product might be vehicle sales, but a subscription fee can be paid in exchange for services such as vehicle registration, maintenance, or insurance. The service might be a meal kit service but the value would be meal selections catered toward different diets or sharing knowledge, teaching a cooking skill, or a guide through coaching. This could be a subscription created for a niche of their vegan, paleo, and gluten-free customers. There is no product or service you cannot transition into the subscription model. Your customers will constantly purchase these products and services because of their need to replenish their supply repeatedly.
Knowing the value-added offering(s), give them an offering that’ll make the customers feel that they have access to something they wouldn’t have been able to access. After creating these offerings, comes the need to maximize marketing and sales strategies to help market your subscriptions. Suppose your brand is strong and famous in the market. In that case, you should leverage your existing asset to launch this model since you already have the name, reputation, and market. You can also look for partnership opportunities to align your brand to the bigger one or start from scratch as a startup.
The possibilities of the subscription-based models are limitless. The only ones benefiting from this diversity are mostly the subscription membership-based companies and their customers. It would be best to embrace this model because it is a viable and proven business model that can help you thrive in today’s and possibly future climates.