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5 Benefits of a Subscription Business Model

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedSep 20242 min read

The subscription economy has rapidly taken off over the past decade, growing over 435% in the past nine years. There are advantages of the subscription model for businesses and customers alike, with an emphasis on building long-term relationships between vendor and client. If you’re on the fence about trying out the subscription model, here are five clear benefits to consider.

Predictable recurring revenue

Enrolling customers in a subscription business plan is a great way to ensure a steady flow of income. With a pay once model, you’ll need to focus your efforts on attracting new leads and converting them to sales. This causes revenue to fluctuate from one month to the next. One of the benefits of a subscription business model is that customers agree to make payments on a regular basis – usually monthly. This makes revenue more predictable, which in turn makes it easier to plan ahead for expenses and inventory supply. Predictable recurring revenue also makes a business more valuable in the eyes of investors, with a steady stream of income.

Easy entry points

There are benefits of a subscription model for consumers as well. Subscription payments spread large purchases out over time for what feels like less commitment. Consumers gain immediate access to the service or product with a low bar for entry. Your business can make this even more enticing by offering a free trial or discounted rate for new customers. With an attractive pricing plan and special offers, your business puts in less work upfront to attract new clients. This translates to potentially saving money on marketing and sales.

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Enhanced marketing opportunities

When it comes to marketing efforts, the advantages of subscription models include the ability to really engage with your customers. Due to the nature of a recurring service, you can naturally reach out to customers via email campaigns and monthly newsletters. Consistent engagement with your products and services yields usage and preference data, which can help create more effective targeted marketing strategies. The continuous contact involved with subscriptions also naturally builds a trustful bond, making it easier to upsell or cross-sell related services.

Better cash flow management

Along with the predictability of recurring revenue comes cash flow stability. It’s easier to set up automatic recurring payments. GoCardless integrates with major accounting software like Xero and Salesforce to facilitate recurring payments, making it easy to ensure regular, timely and predictable cash flow. With a blend of customer engagement and reduction in late payments, you’ll be presented with the opportunities for growth that enhanced cash flow can provide.

Scalability for growth

There’s a high level of flexibility inherent to the subscription business model. As you start your business, you might focus all your effort on one product or service. Yet as your contacts and cash flow grow, subscription models are easy to scale up. You can play around with different pricing tiers and levels of service. With a month-to-month subscription, businesses can scale up or down to suit the client’s needs.

Benefits of subscription models: the bottom line

Ultimately, there are plentiful advantages of subscription models for businesses and consumers alike. By fostering a long-term relationship, a business boosts engagement for higher customer lifetime value. You can reduce churn while increasing customer retention rates. There’s also the benefit of predictable recurring revenue, which improves cash flow and encourages company growth. To make the most of these benefits, it’s important to continuously find ways to provide value to your customers. While one-off product development has a finish line in sight, a subscription model requires constant innovation to keep deriving its benefits.

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