The “subscription economy” is witnessing a meteoric rise, as revealed in The Washington Post’s recent report. UBS, a financial services firm, predicts that the market will surpass $1.5 trillion by 2025, doubling its current $650 billion valuation. This growth is due to the evolving consumer behaviour post the pandemic, with an array of products and services being offered in the subscription format, ranging from socks to car washes. Multiple subscriptions have now become mainstream, with some “power subscribers” having more than ten subscriptions in their name.
The burgeoning demand for subscription services can be attributed to the enormous benefits they provide to their customers. A prime example of such services is Stitch Fix, which has achieved tremendous success. Subscribers have the liberty to receive a package of five products at their convenience, and they can also unsubscribe, change shipment frequency, pick the cost range, and select what they want to receive. This makes shopping for clothes a thing of the past, as customers can receive personalized recommendations from expert stylists on a regular basis without ever having to leave their house.
Subscribing to a service is a win-win situation for both the customers and the companies that offer the service. In this article, we will delve into the benefits that the subscription model can offer to businesses, resulting in their sustained growth and amplification.
Predicted Income Scheduled for a Certain Time
A regular cash flow provides a sense of certainty and aids in budgeting and planning. Subscription Subscription business models may not provide guaranteed future revenue but can help in generating some level of consistency. For instance, a chain of car washes could comprise 30% of their revenue through a monthly membership fee for unlimited car washes. Similarly, a pet supply store could see 20% of their sales coming from a pet-food subscription service.
A predictable revenue stream allows for a more precise forecasting of figures in both scenarios. Consequently, upcoming staffing requirements, material procurement times and future equipment maintenance can be scheduled with ease.
Simpler Stock Management
Subscriptions assist in better inventory management and enhance the cash flow of businesses. To prevent oversights or over-allocation, it is important to assess the required quantity of each item to meet the demand from subscribers.
In the event of termination of subscription payments, there is a possibility of a shortfall in both anticipated income and inventory requirements. Although new subscriptions frequently materialize, some customers may opt for making fewer purchases spontaneously. Thus, it is necessary to factor in the possibility of subscription income variability while making key judgments, facilitating astute and well-informed decisions.
Fortified Connections
Building long-term connections with customers is the ultimate goal. Returning customers and references are a lucrative source of continual revenue. Yet, cultivating customer loyalty requires patience and dedication, often needing multiple interactions. Implementing a subscription model enables easy and frequent engagement with customers, keeping them informed each time they receive your product or service.
Not only does frequent interaction with customers keep your company in their minds, but it is also an opportunity for customers to furnish feedback aimed at improving the services they receive. The subscription process should facilitate regular feedback requests for each product or service sent out automatically. As a result, customers feel a stronger connection with your business, and the feedback received enables future purchases to be personalized.
Frequent interactions can reap additional advantages as companies can utilize customer feedback to influence their product development and marketing strategies.
Reduced Expenditure
Preserving existing customers is facilitated through subscription fees, contributing to the following reasons:
Unexpected Treats.
The excitement of receiving monthly surprises keeps customers engrossed.Interactivity.
With subscription, you can remain frequently engaged with the enterprise.Variety.
Customers can experiment with multiple subscription levels, selecting their favorite one and adjusting their plans accordingly.Comfort.
Amazon acknowledges this preference, prompting them to introduce the Subscribe & Save option for frequently purchased items. Subscribers do not have to place orders every time they run out of products, such as laundry detergent.Reliability.
Subscribers can develop a perception of the level of quality and service that can be anticipated from regular utilization of services. Additionally, advertising more products to customers who already have faith in your business can lead to a significant benefit.
Innovative Opportunities
Given the growing prominence of subscription models, companies have a chance to stand out by presenting distinctive and appealing products. Daily Harvest is an excellent illustration of this concept, as they only deliver fresh produce that is frozen for added flexibility, allowing users to keep them safe until usage. With just a few minutes in the microwave, the product is ready to consume.
Works‘ service provides clear benefits when compared to rivals such as Blue Apron, who only offer basic meal ingredients, and Territory, who distribute meals that must be eaten within a strict timeframe and reheated in a microwave.
For those who wish to remain ahead of the competition, it may be worth exploring alternative methods of offering subscriptions. The following video outlines the three primary subscription options and the types of businesses that may benefit from them.
Consider the Benefits
While subscription models can provide various advantages, businesses must also weigh any potential drawbacks before implementing them. A new marketing approach may be necessary to persuade customers to register for a subscription. Subscription plans and payment methods are solely at the discretion of the business. Furthermore, the company must ensure that they have adequate supplies on hand to fulfil subscription orders.
Notwithstanding the possible obstacles, creativity and an awareness of the company’s objectives can help overcome them. Nevertheless, businesses planning to implement this strategy should assess the potential risks and benefits to determine if the undertaking is worthwhile.
