A Guest Post by Noah Rue
The subscription-based business model has undergone a massive boom in the past decade. Now, practically any service or product you think of can be transformed to operate using a recurring payment model. Surveys have shown that up to 46% of people subscribe to a digital streaming service, while 15% of online shoppers are signed up for an e-commerce subscription.
However, popularity isn’t the only consideration when you’re thinking about making the switch to a subscription-based model. Depending on consumer preferences, the industry, and the product life cycle, a subscription-based model may or may not be the best option for your business.
When it comes to certain things, consumers prefer to buy rather than pay as they go. And their doubts are reasonable, as many subscriptions end up canceled or unused, resulting in wasted money. An owned product, on the other hand, can be used at will or sometimes even resold or gifted, for one flat price.
Ownership versus subscription is always a battle when it comes to analyzing the customer experience. A successful subscription model needs to render ownership unnecessary, as in the case of Spotify or BetterHelp, an online counseling service. Conducting analytics and testing ensures you find the model that works best for both you and your customers.
SaaS services, product-based subscriptions, subscription services, and IoT are industries in which the subscription-based model is thriving. It all started with the rise of Netflix in the late 1990s and has continued until this day.
Obviously, this kind of model isn’t feasible in every industry. If your business has both product and service components, you may find yourself facing a dilemma. It’s all about finding the right balance of bringing in profit while prioritizing the customer. Most people don’t need to buy a new car every month or even every year, but monthly bike subscriptions are popular and ride-sharing subscriptions could rise to prominence in the coming years. The subscription model continues to change the business landscape.
Product Life Cycle
Another factor to take into account is the product life cycle: introduction, growth, maturity, decline. At each stage, a product requires a different kind of management, from planning to designing. During the product launch, for instance, logistical concerns need to be addressed, marketing needs to prepare for the next steps, and manufacturing has to get to work.
Knowing how to use product life cycle management to your advantage is key in finding the most beneficial solution for your business and customers alike. Because the maturity and decline phases are prolonged for businesses adhering to a subscription-based model, during those periods you’re likely to incur more maintenance expenses than you would otherwise. It’s necessary to constantly stay ahead of the curve to avoid getting pushed out of the market. While the exponential growth is unrivaled, this may mean continuously making large investments to grow your company rather than a one-time upfront commitment. The higher risk, the higher the payout.
Managing any business is a learning process, one that requires careful considerations of your company’s goals and your customers’ needs. Progress over perfection is the name of the game, especially if you’re new to the industry and are dealing with heavy competition. Without an efficient billing system, you’ll face challenges, and you might expect to face some initial resistance from customers if you do decide to make the switch to a subscription-based business model.
This kind of business model requires special customer care and maintenance to retain customers, but subscription-based models have the power to transform nearly any industry. No matter your line of work, a subscription or hybrid model could be the answer you’ve been looking for to launch your company to the top.