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4 min read

The Fundamentals of Subscription Business

The Subscription Economy provides flexible, dynamic services in a relationship of predictable, recurring benefits for all!

 


 

Cast your mind back, if you can, to the pre-Netflix, pre-Blue Apron, pre-Spotify, pre-Audible days of yore. If we wanted anything, we had to buy it, and so we all bought into the addictive glamour of retail therapy. Buy a house, buy a car, buy a watch, buy a bag, buy another car – society has always glamorized conspicuous consumption and many milestones in a modern, conventionally successful life that involves purchase and ownership.

The product market throws many obstacles between consumers and the abstract notion of contented happiness that money can buy. Inherent to the ownership of things is the burden of maintaining, repairing, supplying, and eventually replacing them. Apart from regular maintenance costs of consumer goods, the product market has other ways of exploiting the burden of ownership, which is held entirely by the consumer. The Razor and Blades model sell one item - such as a razor - for free or cheap, but the use of this item is dependent on the continual purchase of consumable supplies – the blades. Through planned obsolescence, products are designed to have an artificially limited useful life, thus shortening the replacement cycle and obliging consumers to replace goods.

In contrast to the product market, the subscription business is based not on the transferral of ownership from suppliers to consumers but on a dynamic, ongoing, mutually-beneficial relationship between service providers and their customers. The subscription industry has grown steadily in the digitalized world with many contemporary subscription models facilitated by the internet, particularly smartphone apps. 

According to Forbes, four factors drive subscription business: price, convenience, personalization, and curation. 

  • A recurring subscription is cost-effective for services and staples that need to be purchased regularly by eliminating multiple individual transactions for consumers while also reducing retail costs for companies. This benefit of the subscription economy has allowed companies like The Dollar Shave Club to undermine the razor and blades sales model, as razor blades can now be sold cheaply by monthly subscription and sent to the customer’s door in regular shipments.
  • A subscription model is a convenient, digitalized, and automative process. Streamlined from the start, a subscription model serves as a time-saving alternative to traditional purchasing methods. From order generation to billing and delivery, an effective subscription service simplifies the process through consistent and productive management of resources for both consumers and businesses involved in a subscription cycle. 
  • Subscription models are more than just a delivery cycle of goods or services.  Configured to meet the end-user at a personal level, it provides a personalized user experience through which businesses achieve maximum customer retention while consumers get their customized needs delivered to their doorstep. 
  • A subscription model supports businesses to set up multiple handpicked, curated options for the end-user to discover based on their personalized experience and account history. 

The subscription industry has a long history, starting with 17th-century periodicals, meandering towards opening discount warehouses, to the explosion of online services and products. Businesses can now upscale with more customer touchpoints, higher customer retention, better cash-flow management, and allocation of inventories in the digital world. Meanwhile, Consumers are no longer confined by whichever shops they live near but can instead access an array of exciting new products, content, and services - all for a small recurring subscription fee, fully automated in any of their devices! 


 

References: www.forbes.com, the-truth-about-online-consumers.pdf