Photo by Marques Kaspbrak on Unsplash

If you’re paying a monthly fee to stream ad-free videos or listen to ad-free music, or you even get a monthly exotic ramen pack delivered to your door, then you are no stranger to the subscription business model that industries are adopting almost everywhere.

As the digital world continues to expand, businesses have actively been looking for warts to transfer their business model. The COVID-19 pandemic has increased that need, giving them a breakthrough in reaching consumers more effectively. 

Brands like Blue Apron Meal Delivery Services, Dollar Shave Club, and Birchbox have provided a new way to buy online. Research conducted by McKinsey & Company in 2017 showed that over 80% of their respondents who were online shoppers were familiar with subscription-based services, and 15% of online shoppers have subscribed to at least one service over a duration of 12 months. As it is, subscriptions are quickly becoming a popular way to acquire goods. 

If done correctly, subscription businesses can target their customers and increase their revenue while providing consumers convenience, value, and a customized selection according to their tastes. 

What is a subscription business model?  

Simply put, subscription businesses provide access to their products by charging customers a recurring fee. It could be monthly, annually, or pay-as-you-go. This type of business model allows you to foster relationships with your customers to create a steady stream of income. In terms of customer retention, you are able to keep customers for a forecasted length of time without having to constantly engage them to purchase again. As a customer, the value you get is the convenience of continuously having access to products or services. 

Subscriptions aren’t exactly everyone’s first option. As a matter of fact, having to commit to something long-term can make it hard to acquire customers. For starters, subscribers are looking for three things: savings, convenience, and personalization. With an increase in expenditures today, everyone is looking for either value for money, or a reason to spend less. Convenience plays a big factor especially if it saves them time and effort in getting the product, or completing a task.  Personalization is also another feature that consumers look for in service particularly if specific functions can be performed to their benefit.  Finally, nothing beats a great overall experience. Most other subscribers will sign up especially if they see a compelling review or a recommendation from a reliable source. And this is one way of marketing subscription-based services: by word-of-mouth. 

The downside to subscription businesses is, as fast as you can get subscribers to opt-in to a long-term subscription, they are also quick to cancel if they feel that the product doesn’t provide a superior experience for the amount of money that they’re putting out at one time, or if there is an overall lack of quality. 

Subscription-based businesses have been around for longer than you could imagine. Long before items were made available online or digitally, consumers already subscribed to magazines, newspapers, and milk bottle deliveries. Today, different major businesses employ subscription models such as video streaming services, software, meal kit boxes, beauty boxes, gym memberships, and food supplements. Here are five industries that employ a subscription business model 

Car Ownership vs Usership

A few years ago, owning a car was non-negotiable in order to get anywhere: travel for work, take the kids to school or do your groceries. If you are married, you and your spouse would require separate vehicles.  This usually entails a long-term car loan agreement with a big down payment. 

Today, consumer behaviors have shifted, and owning a car doesn’t seem to be as crucial nor is it as costly. Leasing a car has become popular over the last few decades, making payment terms shorter and manageable for those who don’t want to be tied down to a long-term payment setup. One added value is being able to use a new car every few years without having to worry about selling or trading their current car. The only disadvantage is that the lessee needs to take care of insurance, maintenance, and repairs for the time that they are leasing the vehicle. 

Car subscriptions on the other hand are like a lease, but with shorter terms and more flexibility meaning you’re not tied down to years of car payments and you can quit after a few months if you don’t need the car any longer. Plus, insurance and maintenance are included in the cost. It’s a little more than what you’d pay for a car lease, but it guarantees you a car to use without having to worry about anything else. 

The following carmakers offer car subscription services:

• Audi
• Lexus
• Porsche
• Volvo

If you’re looking for third-party companies, the following below offer car subscriptions services: 

• Zipcar
• AAA Car Subscription
• Enterprise
• Hertz

Video Streaming Services

Anyone who has had a cable subscription has heard of Disney, HBO, and standalone services such Netflix, Hulu, and Amazon Prime Video. These started as an add-on to DVD and other digital downloads. With the boom of the internet, more and more people are able to use their existing computers to watch shows you would normally see on TV. What’s even better: payment options are flexible, you can choose which services to subscribe to, and there are many shows to choose from. 

Because of the internet, you can even subscribe to international video streaming services. If you are into shows from the UK, Ireland, Australia, and New Zealand, you’ll find the offerings of Acorn TV and BritBox to your liking. If you’re a fan of classic and independent films, binge on Kanopy. If you happen to stan a particular Chinese, Kpop, or Jpop idol or group, or you’re hooked into Asian dramas and anime, you’ll find iQiyi or Viu a satisfying choice. 

With a steady stream of quality content, the absence of commercials or ads and the chance to see what happens in the next episode, and the ability to go mobile and take your TV shows with you wherever you go, it’s not so hard to see why a video streaming subscription is now a must-have in today’s society. 

Gaming 

We’re all for entertainment. If you could subscribe to a movie streaming platform, you can certainly do the same to play games. Since 2017, CD and DVD sales and rentals have gone down as opposed to the increase in subscription memberships. 

In light of the COVID-19 pandemic, video game sales saw a rapid increase as people turned to online alternatives to keep entertained. Gaming subscriptions enhance the gaming console and extend the features for the avid gamer. You no longer have to buy a game, finish all the levels, and figure out a way to squeeze out a better experience by playing it all over again, crushing all the difficulty modes. 

Today, video gaming companies take care of the variety for you – provided you subscribe to their service. You don’t even have to own a physical copy of the game. Simply download to your console, and you’re good to go! It can become an easy choice for consumers, especially when you feel you are getting more than what you paid for. 

Other benefits offered by different companies if you subscribe to their service include: 

• Access to the most popular games 
• Early access to new releases
• Discounts to digital purchases
• Play P2P or interact with other gamers
• Different kinds of in-game rewards and exclusive content

Health & Wellness 

One of the most important expenses for consumers is healthcare and medication. The ability to have easy access to healthcare at an affordable price range is so much more appealing to consumers than having to worry about it later when the time comes. The subscription model in health and wellness might seem like a foreign offering, but in fact, it has been in practice in America for over 20 years. 

There are different types of subscription healthcare plans which aim to make health care accessible by combining insurance, telemedicine, and primary healthcare. For a monthly fee, procedures and doctor’s visits are covered. The benefits include primarily having on-demand access to doctors and physicians, different medical benefits, appointments scheduled the following day or even the same day, vaccines, and several options to connect with your doctor.

The only drawback to Subscription Healthcare as a merchant is that many banks see this as a high-risk type of business due to chargebacks, low credit scores, and the risk of fraud. Usually, in order to process credit card payments, high-risk businesses need to partner with payment processors that can function with this much risk. 

SaaS

Over the past decades, software vendors have sold one-time licenses to software applications. But just like Netflix is a successful subscription-based product, Adobe and Microsoft have excelled with this kind of business model. One major success of products like this is access to cloud-based products, making it easier for users to be able to use applications and have storage without having a physical piece of hardware or local computer, and having data and information readily available as long as they have a steady internet connection. Other advantages of course include having access to sophisticated programs that allow you to perform the functions you need, and more. 

Subscription-based software also minimizes users from having to purchase updates or install them on their own, and 24/7 support is always available at the click of a button. You have the option to pay only for the features you want to use. 

Subscriptions Are Here to Stay 

Many more businesses are using the subscription model as the general public is beginning to accept this as the new way of acquiring products and services. Whether it’s shopping for clothes, beauty products, services, entertainment or even getting groceries, the subscription business model can guarantee some long-term customers. 

While it may seem that it’s a great way for your business to maintain a stream of revenue, make sure that your product fits your market and it must address a pain point that doesn’t have a solution yet. Put that together with a pricing strategy that gives value for money, and an exceptional experience, and you can build on that foundation to regularly revisit and update your pricing and your offerings to fit the changing needs of your consumers.