Once upon a time, the subscription model was relegated to magazines, periodicals, and other in-print publications. Now, customers can subscribe to everything from monthly video game streaming, to champagne, to business-class software. Subscriptions have become so commonplace that as of 2020, 69% of all consumers maintained more than one service, with a growing number juggling an entire portfolio of recurrent platforms.
Clearly, the consumer has figured out all the advantages, both financial and emotional, that go along with subscriptions, but what’s in it for the businesses that offer products “as-a-service?”
Here are four key advantages to launching your business’s own subscription-based product.
It Provides a Steady and Recurring Source of Revenue
We’ve said it before, but it’s impossible to talk about the benefits of subscriptions without bringing up the stability of recurring revenue. Traditional sales revolve around qualifying a lead, pitching your product, and ultimately closing the sale. The hope is that somewhere in that sales process your representative forms a relationship with their customer and sells them on the value of the discrete product as well as ongoing business with the company itself. Obviously, that takes a lot of work and the results can be sporadic.
The as-a-service model has recurrent business built into it. With subscription-based pricing, your company gains a steady source of monthly revenue, making planning and forecasting activities easier and more efficient. The advantage is so pronounced that Salesforce recently stated that 52% of businesses that employ a subscription model owe 40% or more of their revenue to that very model.
From an accounting perspective, subscription services just make sense.
It Improves Your Scalability
A subscription-based sales model dramatically increases scalability for both you and the customer, especially if you offer tiered services with additional bundled amenities at higher price points. As the customers’ needs change, they can easily raise or lower their subscription tier without outright cancellation.
Keep in mind, their scalability is your scalability. Subscription-based pricing gives adaptability back to the customer, allowing you to meet their needs while maintaining a long-term relationship.
It Increases Brand Visibility
A good subscription service will become synonymous with the product that it offers. For example, when someone is going to stream content, they will probably say they are going to go watch Netflix, regardless of the actual service they use.
Absent of a brick-and-mortar sales model, subscription services are 100% invested in brand identity. And while marketing efforts are doubly crucial for a subscription offering, the reduced overhead allows them to sink that money into advertising, putting their name in front of customers using a multimodal strategy that employs all channels.
When done right, a subscription will carry your brand name far.
It Generates Additional Sales Opportunities
Old-school retail marketers had it figured out. Their job was to supply the in-person sales force with the tools necessary to maximize every interaction. The term was “add-on sales,” and retailers industry-wide measured units per sale as one of their key performance indicators.
Companies that employ a subscription-based pricing model have found similar ways to boost the number of services that they sell to each customer through bundled offerings. Think Disney who acquired Hulu just before the launch of their own Disney+ streaming service. From moment one, they allowed customers to select their streaming platforms à la carte, but they also offered a Disney/ Hulu bundle for a prorated cost. This serves to dramatically increase their revenue and market share while passing on the savings, and value, to the customer.
Embracing Your Own Subscription Service
Subscription pricing has become an industry staple. That also means that a recurrent sales structure is no longer a novelty. To remain competitive in the current market you have to offer a high-quality service or product that customers want on an ongoing basis.