Subscription Business:
Workflow, Ideas, Pros & Cons
Subscription business is a popular and rather profitable business model today, but how exactly does it work, what are the examples of successful subscription businesses, and how to start a subscription business? We will answer all these questions in this article. So, without any further ado, let us dive right into this topic.
What Is a Subscription Business Model and How Does It Work?
The Subscription business model is a recurring revenue model that involves selling services or products throughout a certain period of time. A business model centered around subscriptions entails a repetitive revenue structure where clients commit to paying a weekly, monthly, or yearly charge for access to, in most cases, a certain service or, less often, some products. Subscribers have the option to extend their subscription at predefined intervals or cancel it. This approach empowers you to harness your customer connections, establishing a consistent and reliable income flow.
As a rule, subscription businesses are profitable for companies and expedient for customers. The thing is, using this business model, companies retain customers for future sales instead of re-engaging them, which guarantees more profits. At the same time, customers get more services for a lower price since they get them in bundles or, like on most streaming platforms, do not have to buy each item (e.g., movie, TV show, or song) separately and have access to the entire library or range of services for a certain period of time. In general, subscriptions offer plenty of benefits to customers, such as ad-free experience, discounts, unlimited access to services, priority support, and many more. In return for such treatment, companies get loyalty, which results in profit growth and reputation improvement. Finally, managing subscriptions is not difficult at all if you have a reliable CRM like Germius, so make sure to try it.
How do Subscription Businesses Work?
The workflow of the best subscription businesses is surprisingly quite simple. A customer selects the type of subscription that fits their needs, depending on its duration, price, and services/products it provides. Then, they purchase the subscription, therefore agreeing to the company's terms and conditions. In turn, the company provides the services described in the selected subscription for the period of time the customer chose. In most cases, a subscription can be canceled by a customer at any time, but at the same time, most subscriptions are auto-renewable, which means that a customer will be automatically charged a set amount of money once the subscription expires.
Among the most prominent subscription business examples are Netflix, Amazon Prime, Disney+, and HBO Max. These are all popular streaming services that offer unlimited (for the duration of your subscription) access to all the movies and shows in their libraries to their subscribers. In fact, the subscription model is one of the main reasons for the popularity of all these services since customers get attracted by unlimited access to all services for a relatively low price, which results in loyalty and more profits for the abovementioned platforms.
Benefits of the Subscription Business Model
Obviously, subscription businesses have plenty of benefits for both companies and customers, so let’s take a brief look at some of the most important ones:
- It's convenient and affordable for customers
- It allows businesses to predict revenue accurately
- It attracts more customers
- It lets customers explore new products
- It helps build strong relationships with customers and get more loyal clients
- It decreases customer acquisition costs
The subscription model indeed has a lot of benefits, which makes it a great choice for many types of businesses. Thus, if you feel like this model fits your business, just go ahead and give it a shot with Germius.
Best Subscription Business Ideas
So, let’s say you want to start a subscription business, but you are not sure which one you would like to found. In this case, we have some subscription business ideas for you, so here they come:
- Content libraries
- Pets
- Vitamins
- Hobby newsletter
- Craft kits
- Home improvement
- Meal kits
- Beauty samples
- Online classes
- Services
These are the best subscription business ideas that can be developed even by beginner entrepreneurs. So, if you feel like a subscription business is your cup of tea, make sure to try it.
Successful Subscription Businesses Examples
Starting a subscription business is obviously not a bad idea, but a lot of entrepreneurs hesitate since they do not believe that a subscription-based service will bring them as much profit as selling single items. To bust this common myth, let’s take a look at some subscription business examples:
- Streaming services (Netflix, HBO Max, etc.);
- Software subscriptions (Microsoft, Adobe, etc.);
- Monthly subscription boxes (Dollar Shave Club, Stitch Fix);
- Magazine subscriptions (The Washington Post, The New York Times, etc.).
Apart from that, subscription businesses can be divided into groups according to the type of subscription model they use (see the example below).
It’s also worth mentioning that a company can use a combination of several models since that allows it to attract more customers and, on a large scale, get more profits. For example, you can have a flat rate model but offer your clients discounts for longer subscriptions (subscribe and save) as well as suggest single, business, or family memberships that vary in price (per-user pricing).
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Flat-rate.
This model is the most popular in the world and is used by thousands of companies — a regular fee is charged monthly or annually, and the services are provided to a customer (Amazon Prime).
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Per-user pricing.
This type allows several users to use one subscription, but the more members — the higher the price (Qwilr).
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Tiered pricing.
In this model, a customer can choose among different subscription options that have different levels of access to features and, therefore, different prices (Netflix).
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Per-feature bundle model.
This model is very similar to tiered pricing, but users can pick the very features they want and, therefore, pay only for those services they need (HubSpot).
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Subscribe and Save.
The subscribe and save model is popular among online services, and in this model, the price depends on the duration of the subscription (the longer the subscription you buy — the less you pay per month) (BarkBox).
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Freemium model.
This type of subscription offers access to a service for free, yet a lot of features (usually the most important and interesting ones) are only available within a premium membership (Duolingo).
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Usage-based pricing.
In this model, users pay for both a subscription and particular services, but the fees for subscribers are usually lower than the ones for other customers (Zipcar).
How to Start Subscription Business: Practical Tips
Last but not least, let’s briefly talk about how to build a subscription business. So, here are some practical tips from our expert team:
- Determine your niche and the type of services or products you can offer
- Make a business plan and prototype
- Set your budget and find investors
- Get a domain and launch a website
- Set up a subscriber management system with Germius
- Develop and launch your marketing campaign
- Accept your first orders
Of course, starting a subscription business is more challenging than it may sound to you, but we still hope that these tips will be useful and contribute to your success.
Conclusion
The subscription business model is one of the best options for many types of businesses, and it has great chances to bring your company to the top. So take a look at both offline and digital subscription business ideas, determine your niche, figure out how to start subscription business, and launch your subscription-based service with Germius.
