6 Successful Examples of Subscription Models
There are more and more companies operating under the subscription model, as it has proven to be very profitable and attractive in many categories.
Netflix, Disney+, Amazon Prime, hoot suite either The New York Times, are some of the companies that have succeeded in the global market thanks to this successful business model.
Without a doubt, they have known how to exploit a market niche that is willing to pay for more exclusive products or services.
Today, the subscription model is used by numerous businesses and websites, even though its origins date back to newspapers and publishers that became habitual during the 17th century.
The subscription, a very successful business model:
The subscription model is very easy to understand and the truth is that each year it generates billions in revenue worldwide.
This business model It is extremely profitable, since income is generated on a recurring basis.
Today we will tell you more about this topic and we will even share some success stories that have turned out to be very revolutionary for the times we live in.
What is the subscription business model?
In fácil words, a subscription model implies the sale of content, products or services, in exchange for a periodic payment (daily, weekly, monthly, semi-annual or annualized).
Over the last decade it has experienced truly exponential growth, especially in the content, physical and digital product categories.
In fact, its popularity has escalated voraciously in the environment on-line, since it offers multiple advantages and benefits to users.
Building strong audiences is a critical success aspecto, considering that customers will not make a single payment for a given product or service.
In other words, it is necessary to offer them a quality service so that they are willing to renew their subscriptions at the established time.
This has caused the companies become more and more demanding, bold and competitive, since otherwise they would risk losing relevance within their niche.
Operation of this business model
The operation of the subscription model is very fácil.
In essence, customers must make regular payments if they want access to a certain product or service.
One of its greatest competitive attributes is that the price of each subscription is usually more affordable than that of traditional products.
This is usually because the prices are contingent on how long the subscription will last.
So the longer its duration, the more maleable the pricing policy of each company could be.
Offering subscription services is an innovative business that is trending worldwide, especially in the technology campo and in the replenishment of products.
In theory, they make life significantly easier for customers because they don’t spend time deciding what they should buy, or how often they should buy it.
Consequently, this has become one of its greatest advantages, especially within younger audiences.
Subscription model features
Here are some general features of the habitual subscription model:
1.
According to a report from LinkedIn, this business model allows companies to continually improve the value of their offerings.
2.
Subscriptions to products or services are often essential to the audience.
In this way, constant or massive cancellations are avoided.
3.
The product or service to which customers subscribe satisfies a real need.
4.
Generally, subscription models are based on pre-existing consumer behavior.
5.
They tend to offer a free trial to users, so that they cánido get to know and test the service before making the first payment.
6.
Revenue retention often trumps customer retention, and therefore subscribers tend to spend more money on their subscriptions over time.
6 Companies that have succeeded with this model
Now we would like to introduce you to some companies that have succeeded worldwide thanks to the subscription model:
1.Netflix:
So much Netflixas HBO and Spotify they are part of the successful content subscription model.
Basically, users pay for their respective subscriptions in exchange for accessing a curated selection of movies, series, and music.
According to data from Statista, The total profits generated by this company during the first months of 2021 exceeded $7 billion dollars, which espectáculos the profitability of this business model.
2.
Amazon Prime:
Currently, Amazon Prime stands out within the category of subscription services.
In this case, customers pay monthly to access greater home delivery benefits.
And not only that, they also offer discounts and exclusive audio or vídeo content that they could not access with other services.
It should be noted that in 2020 subscription revenue represented 6.5% of the total revenue generated by the company.
3.Adobe:
Adobe has also promoted a profitable business by offering its applications under the subscription model.
It is a monthly subscription that allows its users to access all its programs and services without limitations of any kind.
In March of this year Adobe reported that its total revenue has reached almost $16 billion, and that the revenue generated by the subscription to its digital experiences is 23%.
4.Microsoft:
Microsoftthe company that turned Bill Gates into one of the richest men on the planet, debuted in 2011 within this business model with office 365.
In this way, users had the possibility of accessing the same functionalities of their desktop programa through the cloud.
This allowed him to increase his sales by 70%, while his number of subscribers exceeded 18 million in just a few months.
5.Spotify:
This cross-platform application allows you to play music vía uso contínuo and enjoys great popularity worldwide.
Like previous companies, Spotify it also operates by subscription, and this allowed it to generate more than $7 billion in profits during 2020.
6.Hootsuite:
This tool also offers a subscription and is used to monitor popular networks, such as Twitter or Instagram, more easily.
Its free version only allows monitoring of five popular profiles; so users who want to increase that amount must subscribe to this service.
As for its subscription earnings, it should be mentioned that they are greater than $300 million dollars annually.
Main advantages of operating by subscription
At this point it would be very convenient to present the main advantages of this business model:
1.
It brings great value to all parties involved (businesses and subscribers).
2.
Promotes the generation of recurring, stable and scalable income.
This means that monthly billing is virtually guaranteed for companies.
3.
It allows estimating the amount of monthly income that the business will receive, based on its customer base.
4.
The value that each client contributes throughout his life, which is known as “Customer Lifetime Value”, is older for companies that operate by subscription (this does not happen with traditional businesses).
5.
Companies cánido lean on sales strategies very effective, as would be the case Upselling and cross-selling, with the aim of offering a more top and exclusive service.
6.
Users have the possibility of accessing more competitive prices, as well as discounts or special rates, in exchange for the product or service received.
7.
The novelty aspecto is also very attractive to customers, as subscriptions allow them to learn about new brands on a regular basis.
8.
They also access exclusive and regular content, materials, products or services.
Disadvantages of the subscription model
This business model also has a couple of downsides, but the good news is that they don’t outweigh its benefits.
Here we will share some of them:
1.
There are more and more companies operating by subscription, which translates into greater competition and a growing deterioration in prices.
2.
Some businesses could fail miserably if they don’t figure out how to disminuye the abandonment rate.
3.
It is mandatory to offer a high-quality service (one that provides real and sustainable value over time to each client).
4.
Reducing acquisition costs per subscriber cánido be a very complex task if the right decisions are not made.
Recommendations to be successful with this model
– Satisfy a real need of your audience.
– Incentivize customer acquisition by giving them a great experience with your subscription products or services.
– Feel free to offer them a free version before trying to sell them a membership.
– Offer them several subscription levels.
– Execute various sales strategies to improve your services, capture leads and retain your subscribers with greater efficiency.
– Try to equipo prices based on the value you offer.
The subscription generates recurring income:
It is undeniable that the subscription model generates billion-dollar and recurring profits worldwide, especially if companies focus on offering memberships for digital products or content.
In addition, this business model will continue to grow at a rapid pace in the immediate future, especially in the digital environment and in the B2B markets.
Therefore, it is ideal for driving successful and profitable companies, and this is something that you should keep in mind if you are interested in joining this trend in the near future.
Continue reading: 30 Mistakes of an entrepreneur that you should avoid when starting
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