Last editedMay 20233 min read
In recent years, subscription-based business models have become increasingly popular, thanks in no small part to the success of streaming services like Netflix and subscription box services like Hello Fresh. From entertainment and gaming to health and wellness, so many industries have embraced the subscription model as a way to generate recurring revenue and build long-term relationships with their customers.
Subscription models provide a steady and predictable revenue stream, allowing for better financial planning and investment in long-term growth. However, managing subscriptions can be a complex process, and businesses need to follow best practices to ensure their subscription model is successful and profitable.
What is a subscription model?
A subscription model is a business strategy in which customers pay a recurring fee to access a product or service on a regular basis. This can include anything from software and media content to physical goods like clothing and beauty products. The subscription fee is typically charged on a monthly or annual basis and can be adjusted based on the level of access or customisation provided to the customer.
The subscription model differs from traditional one-time purchases, as it creates an ongoing relationship between the business and the customer. This model has become increasingly popular in recent years, as it provides businesses with a predictable revenue stream and can foster customer loyalty through continuous engagement and value-added benefits.
The benefits of a subscription model
A subscription model offers numerous benefits to both businesses and consumers. It fosters customer loyalty, as subscribers are more likely to make repeat purchases and less likely to churn. Additionally, a subscription model can provide valuable insights into customer behaviour and preferences, enabling companies to tailor their offerings and marketing strategies more effectively.
For consumers, a subscription model can offer convenience and cost savings. By subscribing to a product or service, they can receive it regularly without the need to continually repurchase or reorder, saving time and effort.
Subscribers may also benefit from discounts or special offers, reducing the overall cost of the product or service over time. Furthermore, subscription services can provide access to exclusive content or features not available to non-subscribers, further enhancing their value proposition.
How to implement a subscription model
Implementing a successful subscription model requires careful planning and execution.
Determine your target audience: Identify the audience you want to target with your subscription model and tailor your offerings to meet their needs.
Create compelling offers: Create compelling offers that incentivise customers to sign up for your subscription service. These offers can include discounts, free trials or exclusive content.
Provide flexible payment options: Offer flexible payment options such as monthly or annual billing and allow customers to use different payment methods.
Develop a retention strategy: Develop a retention strategy that focuses on keeping customers engaged and satisfied with your subscription service. This can include personalised content, customer support and loyalty programmes.
Monitor customer behaviour: Monitor customer behaviour and adjust your subscription model accordingly. This can include changing pricing, offering new products or adjusting billing cycles.
Using software to automate subscription management
Managing subscriptions can be a time-consuming process, but there are several software solutions available to help automate subscription management.
Automate billing and payments: Subscription management software can sync organically with your payment platform to automate billing and payment processes, reducing manual errors and saving time by taking subscription payments automatically.
Streamline customer management: By streamlining customer management processes, software allows businesses to manage customer subscriptions, payments, and account details from a single platform.
Offer self-service options: Self-service options allow customers to manage their subscriptions, update payment details and cancel subscriptions easily.
Why subscription models fail
While subscription models offer several benefits, they can fail if businesses do not follow best practices.
Lack of customer engagement: Businesses must engage customers continuously to maintain their interest in the subscription service.
Poor customer experience: Businesses need to provide excellent customer experience to retain customers, including responsive customer support and personalised content.
Inflexible pricing: Inflexible pricing can deter customers from subscribing, and businesses need to offer pricing options that meet their customers' needs.
Subscription model best practices
1. Determine your target audience and tailor your offerings to meet their needs
2. Create compelling offers that incentivise customers to sign up for your subscription service
3. Provide flexible payment options, such as monthly or annual billing, and allow customers to use different payment methods
4. Develop a retention strategy that focuses on keeping customers engaged and satisfied with your subscription service
5. Monitor customer behaviour and adjust your subscription model accordingly
6. Offer excellent customer experience, including responsive customer support and personalised content
7. Implement a subscription management software solution to automate billing, payment and customer management processes
8. Continuously engage customers to maintain their interest in the subscription service
9. Offer customisable pricing plans that meet your customers' needs
10. Regularly review and assess your subscription model to identify areas for improvement and adjust your strategy accordingly
By following these practices, businesses can build a successful and sustainable subscription model that generates predictable revenue, promotes customer loyalty and increases customer lifetime value.
How we can help
GoCardless is a digital payment platform that can help businesses automate recurring subscription payments. GoCardless offers several benefits, including the ability to automate payment processes, simplified customer management processes, customisable pricing options and flexible payment methods, including direct debit and bank transfer.
By implementing a subscription model that meets their customer's needs, providing excellent customer experience, and using subscription management software like GoCardless, businesses can generate predictable revenue, build customer loyalty, and increase customer lifetime value while offering a comprehensive and consistent experience.