Subscription model: a model full of security
An upcoming revenue model is the subscription model. More and more we are starting to do this. Where does the success of this model lie and what does it entail?
Subscriptions are increasingly being chosen: Netflix, Spotify or HelloFresh have all been able to get success from this revenue model. But do you know what exactly the model entails? What are the advantages and disadvantages and from which examples can you derive the subscription model? You can read all about it in this blog!
What is a subscription model?
The subscription model is becoming increasingly popular as a revenue model. In this revenue model, you pay a fixed amount over a certain period of time that can be repeated once the period is over. The model is flexible because you can apply it to all kinds of products and services. Because of the convenience of the model, its use is also starting to increase. Not only is it easy to use, but it often comes with service.
Comparatively, a subscription is more expensive than just purchasing the product/service. This can be a great benefit to both businesses and consumers. You sell more quantities of your product/service for a higher price. In addition, the consumer gets more in return because they basically pay less for a larger quantity. If you were to multiply a single purchase by the subscription, you get more value from the product than for a lower amount.
Want to know more about the subscription model? Then watch this video!
Pros and cons of the subscription model
Pros
- Predictability
Demand, volume and supplies are much easier to predict. As a result, you make the right purchases and don’t waste your time. You know where you stand and what kind of sales you can expect: ideal for every Hustler right? - Cash flow
The money is often paid in advance. This makes your income predictable and stable. You also don’t have to keep bothering the consumer to pay. This can also be attractive to possible investors. - Returning customers
With the subscription model, you need to convince your consumers to keep coming back. If you invest in your product/service in the right way, you are guaranteed to get returning customers. In addition, you are in contact with your customer on a monthly basis and you can build a relationship by asking for feedback, among other things. This allows you to develop, grow and keep the consumer happy.
Cons
- It bores
Consumers get the same offer every time so at some point it can no longer be interesting or useful. If you keep delivering the same thing, after a while people get fed up and feel like they’ve seen it. So they must be convinced that they want or need the product. - A brake on growth
It is difficult to add any additional value to your subscription so you are most likely limited to acquiring new customers and reducing costs. This is necessary to make your product/service somewhat interesting for the consumer. It involves risk because you don’t have many ways to stay interesting. - One problem can be fatal
With a model like goods sales, you can easily handle problems with customer service. Often, for example, the product in question is replaced again. With the subscription model, this is a tricky principle because if something goes wrong, you often can’t replace it immediately. The entire cycle (often in months) of the subscription is at risk if a problem arises. So keep this in mind! - Time is money
It is difficult to estimate how much time and effort you will have to put into certain periods. Try to estimate how much time you will have to spend. Some periods can be much busier than another time of year.
Examples of the subscription model
There are different types and forms of the subscription model. To give you a better idea of the possibilities and possible opportunities you could seize, we have listed a few for you:
Bundle model
You combine products or services where the customer gets a benefit as soon as he/she starts buying the bundle (additional quantities of the product or reduced prices). The point is to give the customer a little extra. An example is: the second product for half price.
Community model
You set up a collaboration between people. This, of course, benefits them. You can think of crowdsourcing, among other things. This is often used in governments.
Stock, access and curation
A stock subscription is about selling items (HelloFresh), the access model grants you access to the product/service (Netflix) and the curation model goes for a personalized experience.
