Why More Businesses Are Turning to Subscription-Based Offerings

Opinion: Let’s look at some of the reasons why businesses are turning to subscription-based offerings

41 percent of revenue in retail businesses in the U.S. comes from repeat customers chokkicx/iStock

From health to the auto industry, businesses are either making subscriptions their main model or a core part of it. Businesses and companies that have embraced the model have seen a tremendous growth.

So, what are subscription-based offerings?

Subscription-based offerings is a business model where a customer pays a subscription price in order to access the products or services. You most probably have paid for a subscription before.

Companies that have adopted the model have realized the benefits that come from the guaranteed repeat business. Considering the fact that 41 percent of revenue in retail businesses in the U.S. comes from repeat customers, maybe you, too, should try a subscription-based model.

But first, let’s look at some of the reasons why businesses are turning to subscription-based offerings.

Convenience and customer loyalty

One of the reasons why many businesses are opting to use subscription-based offerings is the convenience it gives their customers. The “autopilot” renewal ensures that customers do not run out of a product or have their service suspended simply because they forgot to pay a fee. With such a system, customers don’t have to remember to refill or reorder anything every month. It saves them the thinking part of making simple and repetitive purchases.

Since they don’t have to make trips to the store, customers save their time and energy by having their products or services delivered when and where they need them.

This helps build customer loyalty and broadens a business’ client base.

Easy budgeting by customers

Another feature that makes subscription-based offerings quite popular is that it makes budgeting easy for customers. This is because subscriptions often offer the products or services at a flat rate. This enables the customers to stay within their budget by predicting and controlling their spending.

The subscription model also brings an added value to customers through bundling (buying all in the price of one).

Auto Transport Quotes CEO Nicholas Dutko said, “Since the understanding that our customers’ spending decision is largely driven by their budget, we’re able to use a subscription-model offer to ease them into our services. At the end, this strategy makes bundling our other services in one a better option for them.”

Bundling is also an advantage to the seller since by selling a single priced product, there are lower marketing and selling costs. Plus, there is no room for renegotiation by the customer.

Ability to scale

This model also allows customers to easily scale up or down without worrying about additional paperwork and lengthy processes. For instance, if some time into their subscription, they need to take some money out of the budget, they can scale down work for a while and, when they have enough to go back to normal, they can come back and scale up smoothly. This way, work doesn’t stop––it just slows down to allow them to work at their own pace, depending on the budget.

To the company, the subscription-based offering allows you to scale depending on the additional value you give to the client.

Predict revenue and increase valuation

Many companies in various industries like entertainment, auto or health are adopting subscription-based services as they allow them to calculate and predict their revenue easily and accurately.

EG Dental’s Eva Guerrero said, “Predictability is not often a concern we dentists want to be burdened with. Having followed a subscription-based strategy for a while now, it’s easier to get the needed data on the financial aspect of running our business.”

With proper information, you can draw up sound investment plans both in growth and hiring great talent, without worrying about profit and loss cycles. Having consistent cash flow and guaranteed revenue could give you higher valuation.

Develop strong relationships with clients

The design of the subscription-based model is such that you don’t just work together on one project and each of you moves on. It requires that both of you understand that you’re in it for the long haul. Meaning, as the service provider, building a relationship with the client is paramount.

Their needs will change along the way. You want to make sure that you know what drives them if you’re to keep up. This boosts the trust and confidence they have in you, as they are sure you’re always giving the best service at the time.

Another advantage is the pressure it puts on you to be accountable in the relationship. Consider this: A project ends on completion. There isn’t much needed from you after that. However, a subscription is about attaining a certain objective that requires successful completion of many small projects. Thus, you take time making sure that each project is done right, because the main objective requires it.

Whether business-to-business or business-to-consumer, businesses are quickly adopting the subscription-based model. And it’s easy to see why: It delivers. No matter your type of business, whether product-based or service-based, subscription-based offerings is definitely something you should try out.

James Jorner is a content strategist and marketer at Effective Inbound Marketing. His company specializes in online branding and digital marketing for businesses.