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How a Subscription Model Keeps Customers Coming Back

Posted by StellaPop on Nov 7, 2018 7:37:00 AM
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Savvy consumers are moving away from single-use products - and so are savvy businesses. After all, the easiest way to ensure customer retention is to build it into your business model. So how are they doing it? With the subscription model.

Gone are the days when subscriptions were only associated with newspapers and magazines. In 2018, 29% of the value of the top 100 brands is in subscriptions - up from 18% in 2009. stellapop-click-to-tweet If you shop via Amazon Prime, watch TV through Netflix, cook using Blue Apron and pay for an annual Microsoft Office license, you're buying into the subscription economy

So why are subscriptions so great, and why should you build them into your business?

Why customers love subscription services

41% of revenue in retail comes from repeat customers. When customers are on to a good thing, they stick with it - and subscription services are a good thing. Subscription services give them the products and services they need for a low fee, and with the ability to pause, upgrade or change up their services as needed. Plus, because subscription vendors have greater insight into customers' needs, subscription services can often be tailored or targeted to the individual. 

Here are a few reasons behind the growth of subscription services:

  • Lower barrier to entry than a one-off purchase
  • Flat-rate fees
  • Seamless payment options
  • More personalized options 
  • Tiered pricing options
  • Quality customer service
  • It's about access, not ownership

Why businesses love subscription services

Subscription-based business models are first and foremost about customer service. A subscription-based business that excels at nurturing and deepening customer relationships are the ones that effortlessly grow their customer base. With subscriptions, your focus isn't on adding new customers. It's about upgrading, renewing and providing add-ons to the subscriptions of existing customers.

Think about your cable service and its endless "upgrade" offers. You probably won't change your cable provider, but you will change your subscription package. 

Remember that 20% of customers provide 80% of revenue and that 80% is much easier to obtain with an automated monthly payment! If you can deliver a stellar customer experience, you're golden. 

Here are some of the other benefits of subscription services.

  • Brand loyalty
  • Easier to retain than acquire customers
  • Consistent revenues at regular intervals
  • Tiered pricing options
  • Can dynamically adjust pricing 
  • More insight into consumer habits

How your business can make the switch

Learn from Adobe's not-so-seamless switch to subscription only. If a business that has historically taken large up-front payments switches over to a system involving multiple smaller payments, your revenue stream will suffer in the short-term.

If you're an established business, aim to keep selling a product or service while also adding in a subscription service. Apple's $.99/month iCloud storage fees are hardly going to supplant the iPhone, but they do bring in a hefty chunk of change each month. If you sell mid-to-upper tier products and services, keep doing what you're doing and offer an additional subscription-based service as an up-sell. Training classes, support or accessories are all possible options. 

If your product is something like software, you may want to consider gradually onboarding users on to your new subscription system. Consider discounts or extra content as a reward for doing so - and be sure to highlight the value of the new service. For example, the subscription-based software has the following perks for users:

  • Regular updates and fixes
  • Everyone on the same version
  • Revenue for maintenance and support

If you're in a service-based business, offer a subscription or membership with extra perks for those who take you up on the offer. You can keep your standard service offerings, but offer an upper-tier subscription for your VIP customers. 

Get in the business of selling an experience

Today's business is less about selling units of a product and more about selling an experience. A subscription-based model gives you an option to do so over and over again. And all with a predictable revenue stream that keeps your cash flow keeping on.

Need some help making a subscription-based business model work for you? Get in touch!

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See Also:

Diffusion of Innovations: How Ideas Spread Online and What You Can Do To Help

Business Minded: Organizational Strategic Planning in 8 Key Steps

Reaching Your Target Audience: How to Craft the Perfect Marketing Persona

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