Subscription Model: Is It Right for You? And Why Do You Need It?
In a world where companies are looking for strategies to retain customers, build a loyal customer base, and increase customer lifetime value, a subscription model may be the answer to achieve all three and much more. In a subscription service, your customers agree to receive products (or be granted access to services) regularly, against periodic payments, until the service is canceled.
When thinking about a subscription service, the first thing that comes to mind is a D2C model for services like OTT platforms, consumer packaged goods, or a regular delivery of dietary supplements. But a subscription model is also useful for B2B businesses, where customers buy regular access to services (or resources) with the subscription.
Vincent Tricarico, Executive Vice President of NutraScience Labs, highlights the fact that a well-designed and well-executed subscription model has the potential to add significant value for both your company and customers in his insightful and insightful article in Forbes.
Vincent highlights nine key reasons why a subscription model can become a game-changer for your company:
- It can increase your company's value by boosting revenue long-term via a recurring revenue pool and make your company more attractive to potential investors.
- It can increase the lifetime value of your customers, allowing you to optimize the cost of acquiring new customers and unlocking the growth potential.
- It can help you better manage monthly inventory, costs, and staffing as you will have a better handle on demand forecast, and you will be able to minimize any overhead costs.
- It can help you get paid automatically and immediately because of payment automation and maintain a healthy cash flow.
- It can help you draw in more repeat customers by maximizing convenience and offering customization in an optimally-built subscription model.
- It can help you test new products by adding samples to your subscription orders and keeping customers engaged.
- It can help you build a loyal customer base if you design, build and execute a convenient and customizable subscription service catering to your customers’ needs.
- It can encourage customers to spend more if you offer rewards – like early (or free) delivery or discounts – for a minimum purchase order.
- It can offer you a steady recurring income and allow you a buffer to navigate the inevitable market uncertainties.
In the end, Vincent concludes that a subscription model can allow you to focus more on customer retention instead of customer retention. And your team can invest their time and resources to keep your loyal customers happy and satisfied, placing your company in a position of competitive advantage.
Want to know more about the reasons why you should be offering subscription services to your customers? Read this comprehensive article – published by Forbes in October 2022 – on the reasons why you need to add a subscription model to your product (or service) offerings.