There are two different kinds of subscription models:
- The customer receives a product / service periodically: the ownership is transferred to the customer
- The customer gains access to a service or virtual product: the customer gets the right to use it (SAAS = software as a service)
Digital business models often provide a basic service for free and offer premium features together with a subscription model (LINK Freemium + Subscription pattern).
Receive every issue over a period of time.
Pay TV and on-demand video streaming
Monthly payment to get access to premium channels (Pay TV) or the possibility to stream video whenever required.
Offers a subscription for black socks and underwear.
A service that sends its subscribers a box of four to five samples of make-up or other beauty products.
The software provider changed the business model from selling the software to offering a subscription.
- Cash flow: A subscription model provides the company with a more reliable cash flow because revenue and costs for creating the product / service are more predictable
- Customer retention and reduction of seasonal fluctuation: Depending on the design of the subscription model, customers can be bound to the service over a defined period of time or cannot reject to buy one issue / delivery.
- Lock-in effect: As the service is provided on a recurring basis, there is a higher probability that the customer will stay with the company because of brand loyalty and / or high switching costs
- Attracting customers: A reasonable monthly rate seems affordable and more attractive than a one-time high payment.
- Reliable service / product delivery: It is essential to maintain or even improve the quality of the service, in order to build on the trust that customers put in the product over a longer period of time.
- Low switching costs: Affordable and attractive subscription rates make it interesting and affordable to try and compare different offers.
- Venturebeat: Why subscription business models will transform every industry
- subscriptionschool.com: Online resource to learn “how to run a successful subscription business”