What is Subscription Business Model?
If you think the subscription service is a new invention in the business world then you’re wrong. The subscription business model is a modern approach towards older services like daily newspapers and monthly magazines. It has now become a strategic approach for growth, revenue, and brand loyalty of many companies.
A Business Model is the one in which the customers pay a fixed amount of money on fixed time intervals to get access to the product or service provided by the company. In a basic subscription model, the company provides a product or a service on a monthly or yearly basis. This gives a recurring revenue to the company and pocket-friendly offers to the customers.
More and more startups are attracted towards this model because unlike other retail business models, in a subscription business model, you have a record of subscribers and hence no inventory issues are raised. This gives them assured and a predictable account of a constant revenue stream. The renewal of a subscription is periodic and automated often. Companies or organisations providing memberships also come under this category.
The subscription business model works in different patterns depending upon the product or service provided by the company. Basically, a company starts by establishing a fixed price point for the product provided by them. The company also needs to decide how often and for how long the company wants to provide the service or the product.
If you’re planning to provide in-house product, it is easier to decide the price point, but you also need to think about how much the customers will be willing to pay you on a recurring basis. If you’re starting out as a contractor, you need to guarantee a steady product line and availability. Also make sure your fixed price point doesn’t undercut your profit margin, as a customer once subscribes to your service, you can’t raise prices for that fixed interval.
