What is a Subscription Business Model?

 What is a Subscription Business Model?

Looking for ways to revolutionise your business model? With the global pandemic reshaping consumer habits and behaviours, the uncertainty around consumer spending requires  businesses to adapt their existing business models in order to meet rapidly changing consumer demands. A subscription business model helps businesses achieve resilience and sustainability in the long run through the promise of recurring revenue or income.

How does it work?

A subscription business model or subscription revenue model focuses on customer retention over customer acquisition. Products and services are offered to consumers on a subscription basis, generating a recurring source of revenue. Subscription models provide businesses the opportunity to market products and services in a more curated and exclusive way, with multiple payments made in exchange for guaranteed and prolonged access to products or services.

What type of business is it suitable for?

Most businesses that sell products or services directly to consumers will benefit from adopting a subscription business model. For instance, fast-moving consumer goods (FMCG) brands can expect to have a steady demand for products with a subscription model. Novelty products, luxury and electronic goods all adapt well to the subscription business model as well. Products can be stand-alone specialties or sold to subscribers in bundles. For brands that offer services such as health and beauty services, exclusive offers, deals, or packages can be sold on a subscription basis. The subscription business model is gaining popularity for its convenience and flexibility, and businesses no longer have to build their own platform from the ground up either. Subscription platforms provide smaller businesses with end-to-end business solutions and often include delivery fulfilment services, which makes adopting a subscription model for your business easier than ever.

How does it differ from other business models?

The biggest difference between conventional sales models and a subscription model is the guaranteed income or revenue stream. In conventional retail or e-commerce sales, revenue is generated through one time purchases, with no guarantee of repeat sales or customers. With a subscription model, consumers subscribe to receive products or services over a period of time and are billed on a recurring basis. This not only generates a steady stream of recurring revenue, businesses can more accurately estimate demand for their products, taking the guesswork out of inventory management and sales forecasting. Subscription plans can be customised to be fulfilled weekly, monthly or annually depending on the product and preference. 

The long-term benefits of subscription revenue models

The top three long-term benefits are:

i. It translates into recurring income

Your business will be much more secure financially with subscribers contributing to a portion of your monthly revenue. If you already own a retail store, setting up a subscription business will make your business even more profitable.

ii. It allows you to analyse and acquire insights

As subscription business models are fluid, you have the opportunity to analyse the product or service that performs best through repeat orders. You can always switch up your offerings if they are underperforming, or put in even more value to the best-performing items. 

iii. It also translates into an increase in customer loyalty and convenience

Your subscribers will likely be consumers looking for convenience, and with convenience being the bread and butter of subscription business models, they will eventually join your steady customer base. Feedback from consumers can help you tailor your product and service offerings to what they need most for greater customer satisfaction, which helps boost brand loyalty in the long run. 

How can you incorporate a subscription business model into your business?

A good place to start is by engaging subscription platforms like SUBPLACE. SUBPLACE is the first subscription platform in Asia that promises long-term, no-fuss usership. Appealing to a broad consumer base, SUBPLACE is the  platform of choice for FMCG, F&B, health & beauty, and fashion brands, among many others. The platform’s risk-free, end-to-end business solution allows businesses to market their products on a subscription basis and retain existing customers while attracting new ones. Incorporating the subscription business model has never been easier with SUBPLACE. Get started today.