Subscription Business Model: Everything Creators Need To Know

1. Introduction

Publishers of books and newspapers first used subscription-based business models in the 1600s. Due to the development of technology and software as a service( SaaS) products,  numerous businesses are switching from a business  profit model where  profit is made from a  client's one- time purchase to a subscription model where  profit is made on a recreating base in exchange for a harmonious access to the delivery of a service. According to Gartner, 75% of businesses that engage in direct client sales will offer subscription services by 2023. The survival of the subscription business model appears a given.

2. What Is A Subscription Business Model?

The basis of subscription business models is the exchange of a good or service for ongoing monthly or annual revenue. They prioritize customer retention above consumer acquisition. Business models for subscriptions essentially focus on how money is made so that a single customer makes several payments for ongoing access to a good or service rather than paying a significant upfront one-time fee. Currently, the economy is shifting away from individual ownership of cars, software, entertainment, and shopping and toward more subscriptions. As a result, the customer's lifetime value (LTV) increases.

3. Is Subscription Business Model Sustainable?

Revenue moves linearly in a classic corporate model from marketing to sales to finance. However, the revenue flow in subscription firms is cyclical. While the goals of each function remain the same, the revenue consequences are greater since consumers must be "earned" over the course of each subsequent recurring payment cycle.

Businesses can easily retain clients by incorporating a viable subscription model throughout a proposed time duration. It guarantees a consistent, ongoing stream of income. Businesses can improve their goods and services throughout this long-term relationship in order to meet the needs of their clients and develop alongside them.

4. Pros of Subscription Business Model

- Dependable income

Future revenue streams are predictable thanks to the subscription model. In times of uncertainty and fluctuating financial conditions, this recurring revenue can guarantee the survival of your company. Additionally, it aids in maintaining the smooth operation of your organization.

- Better relationships with customers

As a consumer base expands, subscription items might grow as well. Customers usually prefer subscriptions because of the ease and possibilities for product customisation. See how UnboxBoardom allows its consumers to change the product and the plan at any time.

Customers can choose to pay for the added value by upgrading to a premium plan, which fosters customer loyalty.

- Spending less on retention

You don't need to spend more money on marketing to reach subscribers because they already buy from you frequently. Additionally, members who commit to a long-term relationship with you and make regular payments are typically less prone to churn. 

- Possibilities for increasing revenue

Once a customer has committed to a basic plan with you, your product(s) has the chance to earn their trust and pique their interest. This will enable you to offer them a free upgrade to a more expensive plan. Additionally, there are ways to increase revenue, such as through upselling and cross-selling new features and extra non-core items. It implies that you can generate more revenue from a single customer without incurring higher acquisition expenditures.

- Improved Forecasting Analysis

The subscription business model enables you to forecast future revenue possibilities accurately. Subscriptions can help in calculating on-demand forecasting, including effective inventory management for eCom businesses that are prone to significant changes in the demand for relevant services.

5. Top Subscription Business Models

- Platforms for Independent Video Memberships

Naturally, independent video membership platforms are the first example. Members pay a regular charge to use your library of video content.

This kind of paid video streaming service provides a sizable collection of informative business courses.

Additionally, they provide one-time sales of particular tutorials at a price higher than their membership.

- Textual Material with a Freemium Option

Many reputed publications like The New York Times have changed their subscription models.  Due to the market dominance of giant corporations like Google and Facebook, this is mostly caused by the fall in ad revenue.

The New York Times has had to reduce its investment in journalism as a result of a significant fall in ad revenue. However, companies are on the right track to success in the new economy if they put a lot of effort into producing high-quality content and have a good membership programme.

Offering enough free material to entice potential subscribers is crucial for lowering the cost of client acquisition, but this shift towards subscriptions can be challenging.

- Offering Software as a Service (SaaS)

Where, oh where, do I begin learning about SaaS? One of the most used subscription business model applications is SaaS, or Subscription as a Service. Software as a Service (SaaS) allows distributing software that uses a central cloud hosting with subscription. This cloud infrastructure facilitates self-service and eliminates the need for on-site maintenance, which is why most businesses prefer SaaS. 

There are a tonne of instances of SaaS businesses in many industries. SaaS firms include Adobe, Salesforce, Slack, Dropbox, Freshworks, and Calendly, to mention a few.

- Journals & Newsletters

According to Mailerlite's email marketing research, individuals still favor receiving information via email. According to their analysis, the number of monthly newsletter subscribers has increased by 40% since February 2020. For paid newsletters, that is fantastic news!

- Box Subscriptions

There are a tonne of excellent ones available. As an illustration, the "Cleaning the Glass" newsletter focuses entirely on basketball, game statistics, and forecasts. Stratechery is another illustration that is only for techies. With subscribers from over 85 different countries, including investors and industry executives, their newsletter and subscription offer exclusive access to content concerning the business and strategy of media and technology.

During the epidemic, digital publications also discovered their silver lining. The New York Times' digital revenue in September 2020 outpaced print subscribers and assisted in making up for the 30% decline in advertising revenue. The future of these conventional magazines expanding their digital footprint as well as digital publishers is undoubtedly increasing reader money through subscriptions.

6. Industries Transitioning to Subscriptions

- Entertainment & Media

The entertainment sector has undergone a change thanks to subscription services, which are now a crucial source of income. Apple is expected to generate $8.2 billion in combined revenue from Apple Music and Apple Arcade, according to a forecast by PYMNTS.com. Apple's music, audio, and video streaming service is expected to provide the lion's share of the revenue, or around $7 billion, while the company's games subscription service is expected to generate over $1 billion.

Fitness

A further advantage is that you can offer clients a variety of fitness options. It enables you to tailor these options just for them. Since there is no one-size-fits-all approach, your membership and subscription options should be flexible with a robust fitness selling video platform that offers value to your audience, and as well, supports your growth.

Customers desire subscription alternatives that cater to their unique requirements and aspirations. Flexible subscriptions facilitate developing better alternatives to your customers. For example, you can charge appropriately when someone moves from video-based training to in-person small groups.

EdTech

A few edtech markets have the resources necessary to mass-produce educational content. This is the rationale behind the edtech marketplace business model's rising acceptance. A marketplace model may be the ideal choice if you wish to host educational resources from various sources.

This business model's premise is pretty straightforward. The goal is to provide a platform where content producers may profit financially from their educational offerings and receive a cut of the money made.

Festivals of film

By offering online subscriptions to the entire film library, soliciting sponsors, or accepting donations from the audience, you can make money off of your screenings.

Never before has staging a virtual festival for millions of people around the world been so simple and affordable. Seasonal premieres of numerous shows in various genres are widely distributed online.

Launch a Branded Movie Channel Begin offering cinematic brilliance through a channel created just to broadcast your film festivals to a global audience. Host the entirety of your event on an OTT platform that is fully featured and monetizable.

7. Wrapping Up

Your business will expand if you use a subscription business model.

A subscription-based business model is advantageous to many sectors, so with a little ingenuity and the appropriate strategy, you might develop the ideal strategy that results in happier consumers and higher customer retention rates for your company as well, enabling you to grow tremendously.