Process & Business Expansion

Posted 01 May 2020, Editor's Desk

How to Create a Successful Subscription Business Model



How to Build a Successful Subscription Business model


We all have realized that the Subscription business model is here to stay. A large number of businesses are moving from a product economy to a subscription economy. 


Why does a subscription-based business model work?


There are 4 factors that we can attribute to this:


  1. It gives you the opportunity to move towards a recurring revenue model. The model is devised in a such a way that the customer will have to pay monthly, quarterly or yearly for your product and service and if you keep providing him quality, chances are higher that there will be a repeat subscription
  2. It allows you to constantly engage and connect with the consumer. Business-customer relationship should not be limited to just a single point purchase
  3. New revenue streams can be created from the current customers by adding more services to your product
  4. A subscription business model can make you take the plunge into digital which can help you save a lot of cost and can help you scale faster


Now if you have chosen to walk the subscription path, you still need to work hard on your product, on your pricing and your service to make sure it is a success. Here are a few tips to succeed using a subscription model



1. Align your Pricing with the Business Goal


  • Pricing is the most important strategy in a subscription business model to make sure your business is a success. It can help you in a lot of ways to acquire new customers, create more revenue streams from existing customers and also make sure the retention rate is high.
  • Structure your pricing tiers on the basis of monthly, quarterly or a yearly based subscription model
  • Also take into account other factors like usage levels, loyalty, new schemes
  • You can start with some basic pricing tiers & adjust it over time keeping in mind customer feedback



2. Bring in Uniqueness


  • Provide the customer with new products and services that add value to them
  • In a subscription-based business model, customer sometimes might not know about the differentiating services provided by you. Spell it out through constant alerts to prospective clients
  • Your product needs to constantly connect with the consumer for it to work



3. Give the Consumer Convenience


  • Today most companies that provide anytime, anywhere convenience to the customers are the ones making money
  • For e.g. All OTT platforms like Netflix, Amazon Prime, and Hotstar give the consumer an option to watch shows/movies anytime and anywhere. Netflix has also devised a pricing strategy for content watching for mobile-only users. This is cheaper than its usual monthly package.
  • Provide the consumer with variety at the click of a button



4. Streamline Cash flow & Billing 


  • In a subscription based model most of the cash being received by you is upfront, the maximum credit cycle is also 30-45 days. Hence, make sure you are rotating your cash efficiently
  • Bring in automation and software to ease our the billing process and optimize cash collection



5. Build Customer Relationships


  • Customer Relations form the basis of every business and similar is the case in a subscription business model
  • If the customer is not happy with your product or service he will cancel the subscription for the next time. Hence, innovation and building strong relationships is key
  • Get to know your customer well and then design products for him. This will also help in deciding the pricing strategy



6. Give your Customer a Choice


  • In a subscription business model, the one size fits all strategy might not work well for everyone. Hence, give the customer a choice to choose a specific service or a specific pricing tier according to their likes and needs
  • This will help you attain more customers as paying according to choice will appeal to your target audience



Every entrepreneur wants a regular income in his business for positive cash flow and business growth. Subscription based business models provide the perfect platform to enable that ambition, but the cheery on the cake will always lie in your product quality and customer satisfaction.


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