Businesses Flock to Subscription Business Model

Businesses Flock to Subscription Business Model

The Subscription Business Model is transitioning into almost every iteration of B2B and B2C businesses imaginable. Its current popularity is attributable to changing customer behavior and the desire for businesses to seek new and sustainable revenue streams. While hardly a new concept, the trend has caught on as industries of all stripes adopt the nascent popularity in the subscription model. Forbes Magazine estimates 15% of online shoppers have signed up for one or more subscriptions to receive products and services on a recurring basis through monthly subscription boxes. 46% have subscribed to streaming media such as Spotify or Netflix. B2B companies are now getting into the fray by offering SaaS businesses subscriptions. Unquestionably, the subscription business model is proliferating throughout the digital landscape.

Essentially, the subscription model falls into three categories:

  • Pure subscription model: This model generates a fixed revenue stream every month at a flat rate.
  • Pure usage, also known as a consumption model: The revenue is variable, and the fees are based on the level of usage.  
  • Hybrid model: The revenue is determined by a combination of fixed and variable consumption. 

As the business community seeks to adapt to changing customer behavior, the subscription market continues to expand into all strips of business and consumer markets. 

Subscription Management Automation Software Eases the Transition 

Moving to a subscription-based model has its challenges. The first obstacle businesses encounter in making the transition to subscriptions entails legacy systems that do not easily adapt to the new paradigm. However, software is available that helps ease the pain and expense. This software is engineered to automate many of the otherwise manual aspects that come with a subscription-based program. Issues to be addressed include the ability to address recurring billing, subscription billing, and payments. The software available today is capable of accomplishing these tasks seamlessly. However, by integrating the software into your existing CRM and data management programs, it is essential to eliminate any disjointed silos that no longer serve your purposes.

Subscription management software offers the following advantages:

  • Provides flexible billing options
  • Helps generate better ROI with your marketing campaigns
  • Promotes better customer retention by personalizing the purchasing experience
  • Helps support customers with multiple subscriptions
  • Cross-sells over multiple platforms    
  • Offers advanced  analytical tools

Selecting the Right Subscription Management Software For You

Initiating the selection of the subscription management software that best fits your company’s needs can be a laborious process. Predictive Analytics Today offers some insight to narrowing down your choices.

Firstly, there are three options to choose from: the fixed recurring model, the seat-based model, and the usages-based model.

The fixed recurring model provides a predictable and continuous revenue stream. With this model, the expected revenue stream is known and remains at the same level during each cycle. Netflix is an example of a fixed recurring model. 

A seat-based model is a plan with a base recurring charge and the ability for the customer to select additional services or products.

A usage-based model is transaction-based. Many SaaS models are based on the level of usage. The subscription model based on usage adds a new dynamic to the equation.

Regardless of the subscription management software model you choose, it’s important to keep in mind that the subscription model is first and foremost customer centric. The success of subscriptions depends on building relationships with your customer. The key is to entice your customers to initiate recurring interactions with your company. The software needs to support that new paradigm.

The platform needs to accomplish the following objectives:

  • To achieve a consistent customer experience, it must support multiple channels.
  • Automate the customer’s journey, eliminating repetitive manual tasks in the back office and restructuring the finance department to accommodate the new mindset. 
  • Provide a single, unified portrait of the customer, eschewing disjointed systems that hinder the automation process.
  • Initiate programs that extend the customer life cycle by delivering excellent customer satisfaction.

Welcome to the New Normal

Digiday, a digital media company, researched the future of subscription-based businesses. It found that, by 2022, 53% of all software revenue will be generated from a subscription model. Additionally, the report revealed that 80% of established vendors are offering subscription-based business models. Put succinctly, the subscription model is a force to be reckoned with as all industries grapple with what has become an uncertain future. 

To learn more about how which Subscription Management company is right for you, contact us.

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