The subscription model is the best business model that guarantees a recurring monthly revenue.
It is a business model that very few people know about. And most of those that know are yet to put it in place as a business strategy.
Most Saas businesses today monetize their platform using the freemium model.
They allow users to use the platform for free and charge a premium fee.
That is a great starter for this model.
So what is a subscription business model?
This is a business model where consumers pay monthly or yearly subscription fee to access a product or service.
This model started far back in the 1500s when there were many undiscovered lands.
Then, the Europeans would ask people to pay for the future editions of their maps.
Soon, the newspaper publishing industry adopted this method in the early 1700s.
They also would ask readers to subscribe to monthly editions of their magazines.
A well-known pioneer in subscription-based news is Wall Street. They asked users to pay for their best content.
Within 18 months, they had records of 200,000 paying customers.
The Financial Times followed by introducing a “metered model” paywall.
Ever since, lots of companies like Spotile have embraced the monthly subscription business model.
Advantages Of The Monthly Subscription Business Model
1. Recurring Revenue and More Profit
The monthly subscription business model allows you to build recurring revenue.
This way, you generate sales without having to sell to customers every month.
For example, in this digital marketing agency, we charge a onetime fee to design a client’s website.
Also, we collect a monthly subscription fee for the website’s ongoing maintenance.
This is the most obvious benefits of this model.
2. Saves Time and Energy
At the time Facebook gained WhatsApp, it (WhatsApp) only had 55 employees.
Operating on the membership business model saves you the headache of managing employees.
Also, saves your time in drafting out new contract deals always. You only need to renew the existing one.
For the subscribers, it takes away the repetitive task of buying the same products over and over.
3. Sustainability and Easy to Sell
Investors appreciate businesses with future promising profits, not depending on the owner.
With the monthly subscription business model, you can run your eCommerce business without your presence.
You are the owner, yet it doesn’t depend on you – making it easy to sell whenever you choose to.
In this century, we grade companies by their recurring revenues.
4. Remove Guesswork By Charging Upfront
If you sell physical products, one major issue you will have is regulating demands.
If you stock low, you lose out of sales because of high customer demand.
And if you stock high, you end up with products all over with no one to buy.
So, the monthly subscription business model is the best way to avoid this.
Because you can tell the demands ahead based on the number of your existing subscribers.
Also, charging for a subscription means you have more cash upfront to work with.
5. Withstand Competition
Most small businesses today are closing because of fierce competition from big companies.
One reason is that they operate on the capital gain (onetime sale) and not cash flow (recurrent sales).
This model can make you the David over Goliath.
When customers pay for your subscription, they want to use their money worth to the last dime.
You see this when you pay for Netflix monthly; you want to watch all movies and even invite your friends.
So, they engage more with your business, which brings you more customers.
Examples Of Industry Using This Model
- Security:
Charge a onetime fee for installations and monthly monitoring revenue.
- Medicine:
Doctors can offer patients the subscription model for a regular checkup.
Also, pharmacists can send drugs and supplements to their patients at time intervals.
- Homes and Gardens:
You can help subscribers clean their homes a certain number of times per month for a fee.
- Creatives:
Business owners can pay for yearly for the maintenance of their eCommerce website.
- Flowers:
Sell subscription to hotels and offices, offering them the delivery of fresh-cut flowers.
- Consulting:
A therapist charging a monthly fee for a four times therapeutic meeting with a client.
Top Business Using The Monthly Subscription Model
- Amazon:
Amazon started out selling books, but today sells almost everything.
As of the time of writing this, Amazon subscribers pay $99 for Amazon Prime.
So, they enjoy the full year of streaming movies and also free shipping on some products.
And recent report shows that Amazon makes more from Prime in a year than any other.
- Apple
The world’s most successful technology company found a new way to get customers for its business.
This happened when they shift their business model to focus on subscription.
It was in 2011 when Apple launched a project called Joint Ventures.
With Joint Ventures, Apple will help a business owner get up and start running for an annual fee.
They will set up your computer and train your team to use the new products.
Also, the Apple One to One is another subscription business model.
With this, they help customers repair and service Apple’s products for $99 per year.
- Microsoft
Microsoft also has gotten its share of the subscription economy.
They launched today the most successful software program in history, Microsoft 365.
They want you to engage more with their products while you pay once.
Factors Affecting The Subscription Business Model?
While there are many factors influencing this model, I will mention these three as top influences.
- The Buyers’ Markets
Today’s buyers prefer to rent. They prefer access to control. They believe in eCommerce than their ancestors. These gave room to welcome these business models.
- Access to Data
It is easy for you to get customers’ data based on a repeated purchase than a onetime sale.
A user who keeps subscribing to a particular service shows deep interest in that category. So, business owners prefer this.
- Ecommerce
Most small businesses can only afford to pay for a small space. This forces them to display only certain products they feel customers will buy.
With your ecommerce website, you can display as many products as you have without restriction.
As you know, eCommerce works perfectly with the subscription model.
FAQs On The Monthly Subscription Business Model
How does a subscription business model work?
Subscription business model work on the idea of selling to receive recurring revenue. It allows a single customer to pay monthly or yearly.
Are subscription models profitable?
The subscription model attracts you with a bigger revenue.
Also, the continual use of your products or services earns your customers’ loyalty.
What are the pros of this model?
Saves Time and Energy
Recurring Revenue and More Profit
Sustainability and Easy to Sell
How do I start a subscription model business?
Begin with an idea
Hire a digital marketing agency
Apply the subscription model strategy
Decide on your price
Launch your website
Promote your business
Start receiving orders.
The subscription business model is worth applying in your business, as it will boost your monthly revenue.