Table of Contents
People love convenience. Like groceries, they want food, medicines and daily essentials to be delivered to their doorstep every week/month. They often wish to be surprised by their favourite brands with new products a couple of times a year. And they avoid stores to a maximum extent these days. For all these reasons, E-commerce subscription businesses appeal on multiple levels.
How many subscription products/services do you use in a day? Maybe more than one. From coffee, diapers, shampoos, cars – everything is subscribable. Companies offer their products and services on an up-front payment model while increasing profitability by selling software on a subscription model.
Pricing models enable customers to pay for technical outcomes on recurring payment models as pay-per-use or subscription. Subscribe and save offers savings on the prices offered by participating sellers, free standard shipping, and the convenience of automatically recurring deliveries. The subscription-based revenue model brings a seamless purchasing experience from on-premise OEM’s that parallels the experience from cloud-service providers.
Subscription business models can include companies and industries – cable television, satellite radio, websites, storage units, gyms, lawn care, healthcare, personal care, online tutoring, vehicle insurance, magazines and newspapers, daily essentials, meal delivery kits, and many more. Subscription box businesses also include accessing online storage for documents and photos, such as the Apple iCloud. There are four types:
The economy is trending for more subscriptions instead of – (1) ownership for cars, (2) software, (3) shopping and (4) entertainment. It increases the lifetime value (LTV) of the customer. A customer pays a regular recurring amount in exchange for using a product or service. Companies now want to transact with customers in the long-term with recurring revenues.
Image source: stackpathdns.com
The subscription business model started with newspapers and book publishers. It then accompanied software as a service (SaaS) products, moving from a business revenue model where revenue is generated from a customer’s one-time purchase to a subscription model in return for consistent access to the delivery of a good or service. The subscriptions automatically renew after the expiry of the current period with a pre-authorized credit card or checking account.
Data analysts at SaaS companies, e-commerce businesses with subscription components analyze metrics like churn, upgrades, and downgrades. It helps them to point this data to understand the business’ subscriber base:
It is also called Monthly Recurring Revenue (MRR) analysis.
Subscription boxes look lucrative. Subscription business models bring in an idea of selling a product or service to receive monthly or yearly recurring subscription revenue.
They focus on retaining their existing customers and eyeing the potential ones by offering a lower subscription rate. It is aligned to generate revenue so that a single customer pays multiple payments for prolonged access to a good or service instead of a large upfront one-time price.
The subscription model incorporates selling a product or service and collecting recurring revenue to continue providing that service or product.
Subscription businesses charge monthly or yearly.
A magazine subscription is the foremost subscription business model.
Many businesses are moving from one-time purchases to subscription models. But this is feasible only in the case of daily essentials and dairy.
Before aligning an on-demand app development company after your subscription based revenue model, let’s understand how apps like Blue apron works on this approach. The cost to the customer depends upon the business industry that you focus on; The price of food delivery subscription costs slightly more than daily essentials or medicines. Blue apron also earn revenue via:
A subscription business offers a low-cost way to buy what you want and need regularly. Companies can scale their business with predictable monthly recurring revenue (MRR). Benefits of subscription business model include:
Subscription businesses worry about customer churn – leaving out dramatically by cancelling their ongoing subscriptions. Customers often get sticky if they find any subscription lucrative. Here are some tips to curb churn rates and run a profitable subscription business:
Businesses need to monitor this voluntary churn and continually improve their service. But besides this, there can be involuntary churn in case of expired, lost, or stolen credit cards, address changes, network errors that disrupt customer’s subscription lifecycle.
Every business revenue model comes with its own set of considerations, so selecting the model involves fully understanding how it will fare for a particular OEM and the type of products it sells. There are all-embracing types of subscriptions:
(1) Curation Business Model – Businesses who follow this model aim to surprise their customers by providing them new items and highly customized experiences. They come with high profit potential but are challenging due to high churn; and operational complexity.
(2) Replenishment Business Model – This model enables customers to automate essential item purchases. They come with high conversion rates, high retention rates but are challenging due to thin margins.
(3) Access Business Model – This model enables the business to offer exclusivity to their customers. They come with a value to the customer and many opportunities for customers. It is challenging as it requires investing time.
(4) Hybrid Business Model – It allows adding subscription services to the existing business. It is a flexible way of exploring the subscription ecosystem without committing to one revenue model.
Seek help with subscription-based apps, avail our experts!
Neeti Kotia is a technology journalist who seeks to analyze the advancements and developments in technology that affect our everyday lives. Her articles primarily focus upon the business, social, cultural, and entertainment side of the technology sector.
Or send us an email at: [email protected]