It’s been a really long time since I have written something here, I need to remind myself at times that I own a blog and I pay for the domain name and hosting charges :P, It was a substantial journey since last few months and I am looking forward to sharing my latest learnings here in my blog.
Now without further delay, let’s quickly dig into today’s short writings. Subscriptions, it has become a very common word these days that too after Covid- 19, theatres were shut, movies were getting released in Over The Top in various applications, but where did this all start, how did this model become a huge hit, How do companies benefit following this system, these are the few queries which we will discuss in the coming paragraphs, sleepy already ???, Ill finish it within few pages, Don’t go away!! 🙂
What Is a Subscription Business Model?
A business that allows its customers to subscribe to products or services they require on a regular basis. This is offered in exchange for regular payments from the customers. Subscription can vary according to time periods such as weekly, monthly, annually, or sometimes even on the basis of customer preference. How cool, right?
Earlier, subscriptions were limited to only magazines and newspapers. But e-commerce is all about innovation and revolutionizing the way in which products and services are perceived, bought, and even sold today. Subscription-based e-commerce models are now being adapted and fully utilized by services that range from the gaming sector to cosmetics.
How do Companies benefit from this system?
Consumer buying habits are trending toward hassle-free shopping experiences, free delivery, and instant gratification. The subscription model serves all those needs, providing value to the customers with low effort, and incredible growth opportunities for subscription-based businesses.
The recurring revenue of a subscription model can be a lifeline for business through the ups and downs of the market and retail cycle and through the COVID-19.
This consistent, predictable revenue lets subscription-based companies order and manage inventory more efficiently..Understanding a customer’s lifetime value in a subscription business can help brands spend wisely on acquisition in slow-selling seasons. Given the closer, the more targeted relationship companies have with subscribers than with typical consumers, the most successful subscription businesses can see reduced churn rates(is a measure of the number of individuals or items moving out of a collective group over a specific period) in their customer base.
Ecommerce subscriptions likewise help brands increase repeat purchases since companies don’t have to win the business ad hoc every time if they have a loyal, subscribed customer base. They have a 60-70% chance of selling to an existing customer, versus a 5-20% chance of selling to a new prospect.
What are the type of Subscriptions Models ?
There are three main models for subscriptions,
- Replenishment subscription model
- Curation or the Discovery subscription model
- Bargain or Access subscription model
Without further delay, let’s see the models with a small example for a quick understanding.
Replenishment Subscription:
This model offers regular subscription services for a ready supply of various products. Think of daily utility products such as food, groceries, razors, or even toiletries. This model caters specifically to such needs. Consumers usually opt for this model because the products that are offered have consistent consumption rates. This is best from a consumer’s perspective because they need not check the price of the product every time they renew the subscription. For example, Amazon’s ‘Subscribe and Save’ option gives a discount of 10% to 15% per subscription if the customer receives products from 5 or more subscriptions in a given month
Curation or the Discovery subscription
A curation subscription model’s basic aim is to satisfy the consumer’s unique tastes and preferences by personalizing the products. It caters to the excitement that comes along with ‘unboxing’ or ‘discovering’ something new, unique, and fresh each time you subscribe for something! For example, the Glossybox(premium UK beauty brand) subscription offers 5 new beauty products every month for their customers.
Several on-demand entertainment services such as Netflix and Amazon Prime Video also fall under Curation services because they provide a wide range of entertainment options such as Stand-up comedy, TV shows, and movies all in one place. The subscribers can discover and choose whatever they wish to watch from varied options.
Bargain or Access subscription model
The Bargain or Access subscription model maintains this by offering their subscribers an exclusive membership that gives them access to lower prices, members-only perks, or first-access deals. For instance, JustFab sells women’s fashion. But for VIP-members, they give up to 30% discount on the retail price of the products.
Summing up:
Consolidating Advantages
Quickly summarizing the advantages of subscriptions in a nutshell
- Subscription-based pricing attracts more customers
- Recurring billing offers predictable revenue
- Subscription billing increases return on customer acquisition costs
- You can earn more through up- and cross-selling
- Build a unique value proposition
- Personalization increases retention
Thanks for going through the post, please let me know your thoughts/comments/suggestions as well and let me know if you want me to write on any particular topic. Thanks!!!!
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