The subscription model is great for both large and small businesses. They work well across a wide variety of industries, so the subscription business model has become quite prevalent. Let’s take a look at the different types of subscriptions:
Software as a Service (SaaS)
Subscriptions have become very popular in the SaaS industry as they help generate a constant stream of recurring revenue. SaaS companies like Salesforce, Mailchimp, Dropbox, and HubSpot provide a solution to a business problem by making the process of addressing that problem smoother and more efficient. The subscription business model is very profitable for SaaS because it reduces entry barriers by offering the product at a lower price thereby widening the customer base. It is easier for SaaS businesses on the subscription model to scale because they have a consistent flow of income.
Recent years have seen the rise of the subscription box-style service among businesses from different industries ranging from makeup, tea, meal kits, apparel, etc. It’s a win-win for both customers and businesses: customers get a neat product delivered to their doorstep each month and businesses get to generate recurring revenue by being able to consistently sell their products. This model reduces customer churn for business and increases profitability.
The access model has been popularized by media giants like Netflix that provide access to premium content or products for a subscription fee. Other popular examples include Spotify, Amazon Prime, Disney+, etc. This model helps businesses generate a consistent revenue stream by offering valuable content, and scale their business. By focusing on delivering value over the long term, these companies reduce churn by nurturing a community of loyal customers.
This model is also used by publications that offer membership subscriptions to grow their revenue and increase their membership base. News sites like The Atlantic, New York Times, and Reuters have used this model by putting up a digital paywall on online news to get their readers to pay for their content. This has helped grow their revenue, with 73% of NYT's revenue being generated from subscriptions.