Networking to help merchants create an online income through subscription-based services is currently dominating the market. In the process it is giving everyone involved more authority and creating stronger, virtual relationships. Even products that are generally sold offline, like Fruit of the Month clubs, are using it as a way to creatively sell their products and services online. This also allows them, or anyone offering a subscription, an easier way to stay in touch and send out the latest news and promotions for your business.
Here are a few more details into what exactly it is that I am talking about below and why it can be so beneficial:
According to the Economist Intelligence Unit research, four out of every five (80%) businesses are currently seeing changes in how their customers prefer to access their services. As a result, over half (51%) are integrating new pricing and delivery models such as subscriptions, sharing and rental goods and services, rather than selling products outright. Of those, subscription-based models have emerged as the primary means to do so, with 40% of the responding companies implementing subscription services as part of their core business.
Unlike the old days where subscriptions relied on consumers to opt out (and made that an overwhelmingly onerous task), today’s online subscription models come in a variety of types. Some businesses employ more than one of these online subscription models. This flexibility provides multiple paths to attract consumers.
Here are some subscription models:
- Fixed: A single, set price for a predetermined set of goods or a service for a defined period of time.Unlimited Use: One set price for unlimited use of services or collection of services. The usage can be personal or for a group using the service (such as a family or group).
- Pay As You Go: Also known as a convenience model. Users pay only for the usage of a product or service when needed.
- Premium Member Subscriptions: Users pay a basic access fee for usage of a services or goods, but are charged additional fees to access other services or gain access to additional or premium content.
- Freemium: Basic services are offered free or charge in exchange for a user’s information (email, contact information, etc.).
There are many long-term benefits for merchants who adopt subscription models. Twelve percent of respondents in Economist Intelligence Unit research said subscription services currently represent more than half of their revenue. This number is expected to grow rapidly, as 84% of respondents anticipate that this share of revenue will increase somewhat or significantly over the next two years.
Subscription Model Benefits:
- Predictable revenue stream: Merchants are able to predict and collect a constant revenue stream from subscribers for the duration of the agreement. This can reduce uncertainty and risks and often means payment in advance. For merchants selling tangible goods this can also mean making inventory purchases with more accuracy and against future sales.
- Recurring revenue stream: In some instances subscription pricing structure can actually be greater than revenue from one-time purchases. Consumers that are happy with the service are also more likely to renew and over time merchants can predict churn rates to help factor more accurate revenue projections.
- Increased ability to negotiate with suppliers: Merchants selling goods can maintain more accurate inventory levels and often negotiate better pricing with suppliers.
- Reduction of customer acquisition costs: Subscription models with high renewal rates help to lower the cost of customer acquisition by helping to maintain a steady base of repeat customers.
- New markets: Subscription services have become a new channel to reach into diverse markets and completely different customers from the organization’s traditional base.
- Personalized marketing: Subscription marketing combined with a reliable, detailed tracking and management system allows merchants to create personalize offers and segment customers. This offers increased potential for upselling and cross-selling other products or services.
- Increased customer engagement/Loyalty: Continued use of a service and repeated interaction with a brand can help build loyalty as a customer becomes attached to the service. This also can increase renewals.
- Higher lifetime customer value: Greater customer inertia and a more committed customer base as it transitions from purchase to opt-out decisions, combined with lower cost to acquire customers can help increase the value of customers.
- Investor appeal: Those looking to start a business using a subscription model can gain more interest from potential investors because the revenue is based on active users and not just projections. This greatly reduces the risk for investors and also can decrease the time for a return on investment.
The bottom line is that subscription-based services are a great way for merchants and affiliates to work together to fulfill customer demand using easy and convenient paths to purchase.
Basically, for merchants and affiliates to be able to work so closely together to deliver the same product or service has truly empowered businesses of any size to thrive online. It also makes the consumers very happy that it is so convenient to stay in touch and to use and or order your products and services.
Have you harnessed to power of offering subscription-based services for your company?