Alternative Business Models: Subscription
With a range of business models out there, it can sometimes be difficult to choose the right one for your venture. We often find that may startups struggle to identify which business model is right for them, so we have provided a quick overview of pros, cons and examples of success subscription services.
If you are a commercial enterprise, you want to make sure that you can make the most of your client base. These days, many business owners are opting for a subscription business model. That is to say that they hope to get recurring clients paying an annual or monthly cost for their services. Deciding whether this concept is right for you is no easy decision. Here are some of the things you ought to know.
What are the pros of subscription pricing?
- Healthy profit margins once started
- It is possible to make a healthy income once your company is going due to the recurring revenue. This aspect is a huge benefit on the size of your profit margins.
- Sustainable recurring cash flow
- You have the stability of repeat customers who will stay loyal to you for a matter of years.
- Extensive market power
- Once you have established your company, it is possible to harness a mass market power, which is a bonus.
What are the cons to subscription pricing?
- Product quality will determine your success
- If you expect people to pay a subscription, you need to prove that your products or services are worthwhile.
- Marketing skills are essential
- You will need to have impeccable marketing and promotional skills if you want people to sign up for your subscription.
- Support and customer services are vital
- When people pay for an ongoing service, they expect customer care whenever they need it.
Successful Subscription Services
Dollar Shave Club
If we take a look first at the Dollar Shave Club case study, it is clear to see an example of a successful subscription business model. Here, the California-based company have taken a product that is essential to male grooming. Working on the assumption that men need to buy razors on a regular basis, the company offers an easy-to-use service. The subscription allows male users to get grooming products in the mail, rather than having to buy them in a store. This service works because it offers people something that they need on a monthly basis.
Netflix
The way that people consume media and entertainment has changed. Customers no longer wait and watch something when it airs on TV. Instead, they want access to their top shows at a moment’s notice. With the rise of illegal streaming, it is surprising that the Netflix campaign took off with such ease. It is a credit to the pricing structure of this business that the company is such a success. In paying a small fee for the subscription, consumers have access to a broad range of shows and movies. It would appear that customers are happy to pay a fee for these services.
Dropbox
Dropbox is our final example of a successful subscription business model. Unlike the other two we have mentioned here, it is worth noting that it is primarily businesses and professionals that use it. Since file sharing is a vital part of the modern world of work, Dropbox has found a niche market to use. There are no free competitors, which means that the Dropbox enterprise has a monopoly on the sector. Thousands of businesses use this package every year, making it a massive success around the world.
Doug
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