Biz Features

Reasons for New Entrepreneurs to Consider Subscription-based Business Models

by . June 5th, 2012

Is Your Business Missing Out On The Subscription Renaissance?

While print newspapers and magazines aren’t exactly in demand these days, the past decade has brought about a renaissance in businesses with subscription-based models. If your product or service has a limited shelf-life, a subscription-based business model might be for you.

Take a look at what these guys have to offer:

Information technology (aren’t you just sick of those words?) works in a pretty funny way. While it basically bludgeoned subscriptions to traditional print media in the head with a cinder block, it has opened up new opportunities for the very same business model almost everywhere else. Not very surprising considering the information in itself is a commodity- it’s just that the channels through which it was sold radically changed.

But while you can get the latest on news online, you can’t literally get razor blades or pet food through your computers or iPhones. Those same tools however, make it feasible for small businesses and entrepreneurs (if we’re targeting the right readers, that would be YOU) to use the same business model on a smaller, yet vastly more cost-efficient scale.

Where Would a Subscription-based Business Model Work?

Whether as a supplemental channel, or a main sales avenue, businesses that sell items and services that need to be replenished or are temporary can benefit from a subscription-based model.  Flowers, cleaning supplies, and toiletries are some of the more obvious things that are easily sold through subscription. Less obvious would be door-to-door massage services, underwear, and socks- among hundreds of other things.

Subscription-based business models aren’t just for items that you’ll need to regularly replace. Products that have limited novelty or timeliness could also benefit from this business model. The same concept has been used for gourmet food, clothes, books, music, colognes and alcohol. I used to be a member of a beer-of-the-week club myself. In the B2B market, some research firms have also adopted the same model as many companies would require periodic data updates.

Reasons For Small Businesses To Consider A Subscription Model

There are several advantages to subscription-based sales. For one thing, you can reliably predict sales numbers far more accurately- which makes stocking less of a headache, and helps keep costs down.

Predictable sales also makes it easy to negotiate lower rates from suppliers, and some of the savings could be passed on to the consumer to encourage sales- this is exactly why I subscribed to the beer-of-the-week club I mentioned earlier- the savings in terms of price had to be worth it, otherwise I (or most people) would not have bothered to sign up in the first place.

Diablo 3 Logo
Even Blizzard is arguably a subscription business these days
From a technical standpoint, subscription-based businesses are relatively easy for online entrepreneurs to set-up, and give multiple opportunities for additional points of contact through e-mail, social media, or some other avenue.

But these aren’t the best things about subscription services by any means- new businesses can especially benefit from this business model as it makes it easier to develop long-term relationships with customers- after all-subscribers are by definition, repeat business.

Subscribers aren’t always your biggest fans

All things being equal, once a subscriber is hooked they are more likely to stay on than people who just happen to be regular customers. A lot of the time, subscribers will not bother to unsubscribe from a service even when presented with arguably better options, as this would require additional action on their part. Which is why AOL still has as many customers as it has. For instance, it took me a few months to change my regular laundry service even after it lost some of my shirts because I kept forgetting to get around to it.

Just because you have subscribers, it doesn’t follow you could do whatever you want when you get new subscribers. Some of them are just too busy or don’t care enough to change. And relying on this to keep you afloat is plain bad business sense.

Relationships with businesses that rely on subscription models are long term , every customer has more invested in them. Which means they’re likely to have something to say about you. Whether or not they have something good or bad to say is totally up to you.

You might enjoy our Basic Marketing Concepts series!

The Marketing Mix: The 4 P’s of Marketing

Customer Relationship Management

Demand Generation

The Sales Process

The Purchase Funnel

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