Today our lives are being impacted heavily by the information and communications technology (ICT) and many people can hardly imagine their lives without phones, tablets or other gadgets. With today’s technology, it has made subscription business models so easy and appealing, but if done right it becomes successful and a powerful tool for growth.
Subscription can be defined as an advanced payment made to receive or participate in a particular thing. So a subscription business model is a business model or idea that charges customers a certain fee to gain access to a particular product or service.
Examples of subscription business model
- Airline subscription model: Wakanow, Mayfair travel Nigeria, travel center UK, etc.
- In-home fitness: mirror, tonal, fitbit, etc.
- Gaming: Xbox, PlayStation, Gaming sites, Betnaija etc.
- Health & Wellness: Happify, Hospital programs or services, HMO etc.
- Education & Professional Development: LinkedIn learning, Shaw Academy, Coursera, Udemy, P4PE Institute, HubSpot, etc.
- Home Maintenance: CXALL Facility Management Company, Handy, etc.
- Entertainment – Films, Shows & Documentaries: Amazon Prime, Netflix, Spotify, Apple Music, YouTube, etc.
- Consumer Electronics: GoPro, HackerBoxes, etc.
- Software as a Service(SaaS): Adobe
- Monthly subscription boxes: Telecom networks, Networking Agents/ companies, Wi-Fi subscriptions, HubSpot, Gym etc.
How to Start/Grow a Subscription Business Model
Step 1: Have a good subscription business model idea and identify your niche and market fit. Understanding the basics; a Niche is best understood as a specific market for products and services. The more specialized your box is, the easier it is to curate products for a specific audience, enabling you to maximize retention and create a great customer experience.
Step 2: Besides knowing your specific niche, you need to analyze your competitors…When looking for competitors, try searching for key words related to your niche/ industry on the category marketplace and see what’s out in the society. During research consider how may subscribers your competitors have, what they’re offering and at what price, and importantly differentiate your package and your competitors packages.
Step 3: Once you’ve found your niche, market fit/industry plus figuring out your competition, you start sourcing for the right customers. Figure out your subscriber’s persona i.e. age range, location, interest, income, or even buyer’s behavior. Most importantly what social media platform do they prefer? After you advertise, always refer back to their feedback and adjust to their ideas or problems. Always accept that the customer is always right.
Step 4: Be clear about your business goals, is it revenue, customer acquisition, or number of units sold? Whatever your business goals are, you need to keep them top-of-mind especially when choosing your business model.
Step 5: Price in support of your Business Goals. Pricing is tied down to three fundamental growth strategies; acquiring new customers, increasing the value of existing customers, and reducing your customer churn (percentage of customers that stopped using a company’s product or service during a certain time frame.) you need to have the ability to manage complex pricing structures in a very transparent, organized manner, it is really important to get a competitive advantage in the market.
A subscription business model provides a predictable revenue model. Once the model is running it starts to create a flywheel effect and gains momentum. Once a company acquires subscriber, it shifts attention from customer acquisition to customer retention. The revenue model for this kind of business helps you capitalize on the compounding value of customer relationships. That means that as long as your customers continually see the value your company provides for them, they’ll continue to pay you for it.