The Subscription Economy has undoubtedly been growing especially after the covid began. Some of the thriving subscription businesses are Netflix, Dollar Shave Club, Spotify, Audi, Fitbit, LinkedIn Learning, and many more on the list.
We are on a planet of seven billion people, five billion mobile subscriptions. – Paul Connelly
Some Facts to Prove that Subscription is on the Rise:
- Subscription businesses have grown 5 to 8 times faster than traditional businesses.
- 78% of adults worldwide have subscription services.
- 75% of respondents believe that people in the future will subscribe to services and own less physically.
- In the U.S., 42% of men and 28% of women have 3 or more subscriptions.
- 64% of respondents say they feel more connected to companies with a direct subscription than companies whose products they purchase one time.
- 28% of subscribers say that a personalized experience is a major factor for a continuing subscription.
- Subscription economy will grow to 1.3 trillion, in the next decade
Now let’s see some of the factors why customers love the subscription economy.
How Subscription Economy is beneficial to the Customers?
- User-Friendly
One of the major reasons why people switch to subscriptions is because it’s user-friendly. There are auto-debit renewals, hence easy payment, and you can cancel anytime.
- Customized
Subscription services provide customized options, so customers can choose what they need the most.
- Economical
Since subscription services are mostly monthly customers can ensure that monthly, expenses are in control. Not just this, if the customers want to try a particular subscription, they could pay for it and check if it suits them, then decide whether to continue it or not. That is, if they had to pay a monthly subscription for using a particular software, it wouldn’t cost them much compared to them buying the complete software.
- Personalized Recommendations
Customers get recommendations from subscription companies based on their usage; this may be regarding new features, products, or services the company is providing.
Let’s now discover the benefits of the subscription economy for businesses.
How Subscription Economy is beneficial to a Business?
1. Recurring Revenue
Subscriptions help find prospects and convert them into customers. Once they become customers, businesses can get recurring revenue.
2. Financial Forecasting and Inventory Management
When customers are subscribing regularly to a particular product or service, it is easier to predict how much inventory is needed. Hence financial forecasting and inventory management becomes easy.
3. Customer Loyalty
Customers who subscribe to a particular business get connected to that brand. Hence businesses can concentrate more on the already existing subscribers rather than acquiring new customers.
4. Customer Retention
Subscriptions have better customer retention compared to businesses that rely on one-time buyers. But if you want to know how, it’s because there is a continuous connection between the business and the customers. It could be because of the text messages businesses send regarding an upcoming order or new features. The customers feel more connected to the business.
Subscription businesses also offer flexible subscriptions, hence reducing the churn rate and increasing customer retention.
5. Better Customer Engagement
If customers trust a business and value its products or services, they will stay with the business for a longer period. Another way to keep the customers engaged in the business is to create community spaces and share useful content. This helps customers to interact with co-customers and the business.
6. Lower Customer Acquisition Cost
Through customer engagement and having good customer relationship, it is easy for businesses to avoid customer acquisition cost. This is because acquiring a new customer is costly compared to retaining an existing one.
7. Lifetime Value (LTV)
Once businesses get recurring revenue, it’s sure that the Lifetime Value will go up. Offering subscriptions and one-time purchases are proven to increase Lifetime Value.
8. Attracts More Customers
Subscription businesses can reach a wider number of customers as various prices can be fixed to make products and services affordable for all. Thus, this removes the barrier of higher pricing making it attractive to customers.
If businesses want to shift to a subscription model. Then there are a few steps.
How Can Businesses Move to a Subscription Model?
- Find If Offering Subscriptions Will Help Your Business Succeed
Do you sell products and services which are consistently required? For eg: software products, and continuous services such as content writing. Once you find that the subscription model will suit your business, you can move to the next step.
- Find What Customers Want
Send customer surveys and conduct interviews to find out if they are interested in subscriptions.
- Set a Goal
The correct goal will help you create subscription packs with the right prices. Maybe you are interested in increasing your client base or want to increase your sales. Depending on these goals, you will choose a pricing strategy to attract clients and retain them.
- Choose a Pricing Strategy
Have a variety of prices also make sure to reveal all the charges. Fix a price depending on the nature of your products/services and goals.
- Get More Subscriptions by Improving User Experience
You should make it easy for your subscribers to subscribe. Make the signup button visible to the prospects. For any further assistance, they should be able to contact you via live chat or email, as you don’t want to miss a conversion.
- Make the Payment Process Simple
Have a payment gateway on the website for making payments instead of having links that redirect to other pages.
What Should You Do After Shifting to a Subscription Business?
After shifting to a subscription business, do you want to manage your business more efficiently?
Do you want smart automation?
Want to enable data-driven decision-making?
If yes, then SAP BRIM would be your go-to.
What is SAP BRIM?
SAP BRIM (Billing and Revenue Innovation Management) is a solution for high-volume consumption businesses. It is designed to make a business lifecycle simpler. The business processes include Design, Sales, Delivery, And Billing.
It assists businesses to monetize and deliver more sustainable products and services. The revenue management operations can be made transparent with fully automated and customizable solutions for:
- Billing,
- Invoicing, and
- Revenue Management.
So, What Does SAP BRIM Do for You?
- It facilitates one flexible, harmonized billing engine that brings various channels together into one common billing and receivable management platform.
- SAP BRIM’s billing innovation journey pairs Everything as a Service (XaaS) with durable new streams of revenue as it improves time to market and enables you to build customer loyalty and gain insights into customer preference.
Want To Know More About SAP BRIM?
Mobolutions will help you implement the SAP BRIM solution. We have BRIM experts who offer tailored solutions for Hi-Tech, Third-Party Administrators, Media, and Insurance.
Get in touch with our BRIM specialists right away.
Very informative