Peeling Subscription-Based Delivery App as Blue Apron

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.

Meaning: Cloud-Like Subscription Pricing Models

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.

Types: What is Different about a Subscription Business Model?

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:

• Selling: It drives value to ensure renewals and referrals.
• Buying: It delivers customer experience and builds personalized services.
• Customer Experience: It enables businesses to focus on retention instead of acquisition.
• Investors/Company: It brings in more predictable revenue, deeper customer insights, and a scalable business model.

Emergence: Rise in Subscription Economy

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.

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Use: How Do Companies Go About Subscription Based Business Models?

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:

• The liquidity of your revenue over months
• New customers, upgrades, downgrades, churns, reactivations
• The value of a customer depends on how long a given user keeps paying you money – customer lifetime value, average contract value.

It is also called Monthly Recurring Revenue (MRR) analysis.

Benefit: Are Subscription-Based Businesses Profitable?

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.

Notes: Key Takeaways from Subscription Model

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.

How Does Blue Apron Earn: Revenue Model of Subscription Based Delivery Application like Blue Apron

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:

• Banner Ads – Joining an ad network like Google AdSense to host banner ads on your website.

• Affiliate Marketing – They affiliate programs of other food industry businesses and promote them through their website.

• Franchise Fee – More chefs get on board as the popularity grows. Therefore, a franchise fee for such chefs is another source of revenue.

• Selling Merchandise – Blue Apron sells – (1) branded cookware, (2) tools, (3) recipe guides, and (4) merchandise as an additional source of revenue.

Need: Why Start a Subscription Business?

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:

• Predictable Revenue: You earn a chunk of money every month which lets you know how much to reinvest into the growth of your business.

• It gives you more cash in hand: Many subscription businesses ask for a full – payment upfront at a discounted price. It allows accumulating some buffer money.

• Spend less to acquire customers: It does not require reinvesting in customer acquisition as the revenue recurs and keeps your business going.

• Loyalty: Recurring subscriptions creates a virtuous cycle, and regular purchases allow businesses to understand customer behaviour. Add a bit of artificial intelligence to make the process seamless.

• Makes up-selling and cross-selling easier: Businesses position themselves to make more revenue from existing customers. If done right, it can turn out to be very lucrative.

What You Should Know: Tips For Making The Subscription Business Model Successful

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:

• Evaluate your product viability
• Be clear about your business goals
• Be conservative about pricing at the beginning
• Invest in personalization
• Prioritize retention strategies
• Diversify marketing channels and tactics
• Monitor churn

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.

Conclusive: Choosing the Right Subscription Based Business Model

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.

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