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Building a Successful Subscription Business Model
In 2020, most online services offer subscription-based business models. This includes software, digital goods, eCommerce packages, and newsletter-based subscription boxes.
In the information and technology industry, subscription models are now core business models. Businesses can focus on customer engagement and feedback by building one great software product that continues to engage the audience with consistently updated functionality.
If you’re launching your own online business or need to pivot your business model, consider implementing a subscription service. Here’s how to turn traditional software, eCommerce, or a service-based business into a subscription offering.
Why implement a subscription service?
A subscription service provides access to an online platform for a fixed timeframe and price. This can involve a range of pricing options for flexibility or lower prices for longer investments.
Subscription models can be approached in different ways. Some businesses fully embrace the model and develop their services around it. Others offer incremental discounts in exchange for regular reordering.
Some subscription offerings are based on curation, where brands surprise their customers and offer their knowledge and expertise.
Subscriptions can help predict growth
No matter your business model, forecasting sales, expenses, and cash flow is essential. Opting for a subscription service can make this process easier. You can track strict service tiers, introductory offerings, and project growth based on sign-ups, churn rate, and the subscription length.
If you offer physical products, combining subscribers with anticipated growth can help predict stock requirements, avoiding excess inventory or not fulfilling demand.
Developing a subscription service
Developing a subscription service should follow the business planning process. It involves upfront research, analysis, defining customer needs, and testing and execution. Here are the five steps to follow:
1. Conduct market research
To turn your SaaS product into a sustainable subscription plan, identify your target audience. Understand what they’re struggling with and adapt their needs into a prolonged service. Anticipate how their issues will evolve over time to lay out an updated business pipeline.
2. Conduct a competitive analysis
Research potential competitors to better understand the subscription service space. Find opportunities to undercut the competition, whether through product features, customer service, or pricing.
3. Define your buyer persona
Understand your target audience and create buyer personas. Different subscription tiers or membership plans may cater to different personas. Refine your product to better serve each persona’s pricing and value proposition.
4. Connect with your target audience
Treat sales and onboarding initiatives as the start of a long-term relationship. Showcase your commitment to customer care and engage with them to convert to monthly or annual accounts quickly.
5. Finalize pricing and product offerings
Determine the best price and feature mix for your subscription model. Consider starting with a freemium model or offering subscriptions at discounted prices to attract your target market. Test different price points and features to convert customers and update them over time.
Closing thoughts
Subscription models provide consistent recurring income and long-term customer relationships. Build a secure and performant product that offers reliability, security, and performance. Continuously test and iterate to stay competitive.
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I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
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